100% satisfaction guarantee Immediately available after payment Both online and in PDF No strings attached
logo-home
Summary Valuation $3.79   Add to cart

Summary

Summary Valuation

 85 views  3 purchases
  • Course
  • Institution

Summaries of Valuation

Preview 4 out of 35  pages

  • January 27, 2021
  • 35
  • 2020/2021
  • Summary
avatar-seller
Lecture 1 (NORMALIZING)

• R&D Adjustments:
o R&D should be treated as CapEx and not OpEx:
▪ Make an assumption on the amortizable life
▪ Collect the research spending during that amortizable life
▪ Calculate the unamortized and amortized portion of R&D spending
each year
EXAMPLE:




o Balance Sheet: increase intangible asset (by the value of research asset),
increase deferred tax liabilities (by value of the research asset * marginal tax
rate), increase retained earnings (by the difference between value of
research asset and deferred tax liabilities)
o Income Statement: add back the last year research spending to operating
income, subtract the amortization of research asset in current year from the
operating income

,• Operating Lease Adjustments
o Operating Lease should be treated as financial expenses and should be
recognized as debt on the balance sheet:
▪ Tabulate the lease liabilities in each of the following years
▪ Calculate the PV of the lease payments by discounting to the cost of
debt
▪ Compute PV Yr 2 EXCLUDING the lease payments due in 1 year

EXAMPLE:

,• Income Statement adjustments:
▪ Add back lease expense for both years
▪ Calculate the interest expense and subtract it as a finance cost (taking
into account the total NPV of 2017 in this case which will impact
2018)
▪ Subtract depreciation expense on the operating lease asset




• Balance Sheet adjustments:
▪ Add to non-current tangible assets as PPE (formula below)
▪ Add to non-current debt the same amount (long term)




= 1540.9+(1978.4 – (1342.8*1.06)) - 420

, • Four types of extraordinary items:
o One-time expenses or income: calculate operating income after excluding
these items
o Expenses or income that do not occur every year but recur at regular
intervals: average the expense or income and subtract/add the average
expense/income to the annual operating income
o Expense or income that do occur every year but highly volatile: same as
above
o Items that recur every year that change signs: ignore these
expenses/incomes from operating income

Lecture 2 (CALCULATING REINVESTMENT)
• Free Cash Flow to the Firm:

EBIT * (1 – tax rate) + Non-Cash Expenses + Change in Deferred tax liabilities – Non-
cash income – Capital reinvested in the firm


• Capital reinvestment in the firm:

CapEx – DA&I expenses – R&D expenses + Net acquisition spending + Change in non-cash
NWC




For DA&I, add also the
amortization of research
asset in current year!!!!
Net acqu. Spending:
difference between
acquisition and divestitures

The benefits of buying summaries with Stuvia:

Guaranteed quality through customer reviews

Guaranteed quality through customer reviews

Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.

Quick and easy check-out

Quick and easy check-out

You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.

Focus on what matters

Focus on what matters

Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!

Frequently asked questions

What do I get when I buy this document?

You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.

Satisfaction guarantee: how does it work?

Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.

Who am I buying these notes from?

Stuvia is a marketplace, so you are not buying this document from us, but from seller TomArr. Stuvia facilitates payment to the seller.

Will I be stuck with a subscription?

No, you only buy these notes for $3.79. You're not tied to anything after your purchase.

Can Stuvia be trusted?

4.6 stars on Google & Trustpilot (+1000 reviews)

64438 documents were sold in the last 30 days

Founded in 2010, the go-to place to buy study notes for 14 years now

Start selling
$3.79  3x  sold
  • (0)
  Add to cart