Discounted Cash Flow (DCF) Q&A Bundle

What's the point of valuation? Why do you value a company? You value a company to determine its implied value according to your views of it. If you are advising a client company, you might value it so you can tell management the price that it might receive if the company sells But public companies...

Net Present Value (NPV) The present value of expected cash inflows associated with the investment, less the present value of the investment's expected cash outflows, discounted at the appropriate cost of capital (discount rate). How to Calculate Net Present Value (NPV) (1) Identify all costs (outf...

How to calculate WACC? WACC= Cost of Equity * (%Equity) + Cost of Debt * (% Debt) *(1-tax) + Cost of Preferred*(%preferred) How to calculate cost of equity? Cost of equity = Risk-Free Rate + Beta * Equity Risk Premium How to get to Beta in the Cost of Equity Calculation? 1. find Beta for each comp...

Pv of expected future cash flows intrinsic value of common stock = what under DCF models Chose class of DCF model, forecast cash flows, choose discount rate methodology, estimate discount rate four steps in applying DCF analysis Estimate cash flows, discount for time value of money 2 elements of D...

Discounted cash flow valuation value equals the sum of expected cash flows discounted for time and risk value of a financial investment the present value of the investment's expected future cash flows Three steps to DCF valuation 1.) Estimate the expected future cash flow of the investment 2.) de...

1. Conceptually, a DCF analysis consists of a "near future" value (over 5-10 years) and a "far future" value (the company's value past that period), both of which are discounted back to their present values and summed up. a. True b. False i. Explanation: The correct answer choice is A. The "ne...

Walk me through a DCF - DCF values a company based not he PV of its Cash Flows and PV of its Terminal value 1) project out a company's financial using assumptions for revenue growth, expenses, and working capital to get FCF for each year 2) discount each year's FCF based on your discount rate - u...

What are the line items for a DCF model? Sales COGS Gross Profit SG&A EBITDA Depreciation Amortization EBIT Tax rate Tax-effective EBIT Plus: Depreciation and Amortization Less: Capital Expenditures Less: Additions to Intangibles +- Changes in Working Capital Unlevered FCF What are the value driv...

Name as many valuation methods as you can 1. Discounted cash flow analysis 2. Public company comparables 3. Precedent transactions analysis 4. Leveraged buyout analysis 5. Dividend discount model 6. Liquidation valuation 7. M&A premiums analysis 8. Future share price analysis 9. Sum of parts 10. Ad...

The premise that the value of a company, division, business or collection of assets can be derived from the present value of its projected free cash flow. What is a discounted cash flow analysis premised on? 1. Study the target and determine key performance drivers 2. Project free cash flow 3. Calc...

Discounted cash flow analysis a technique used that adjusts for time value of money making cash flows over time comparable Discounted cash flow analysis limitations - unrealistic status quo - Hurdle (discount) rates are to high - Time horizons are to narrow - difficulty of gaining approval for larg...

Discounted Cash Flow Analysis the value of a company can be derived from the PV of its projected FCF (free cash flow) What kind of value is DCF? (intrinsic value or market value) Intrinsic Value, as opposed to market-values such as Company Comparables or Precedent Transactions Projection Period Le...

1. What's the point of valuation? WHY do you value a company? You value a company to determine its Implied Value according to your views of it. If this Implied Value is very different from the company's Current Value, you might be able to invest in the company and make money if its value changes. ...

What 4 basic questions must be answered to understand any real estate investment? 1. How many dollars go into the investment? 2. When do the dollars go into the investment? 3. How many dollars come out of the investment? 4. When do the dollars come out of the investment? Holding Period Usually s...