Unlevered equity - Study guides, Class notes & Summaries

Adventis FMC Level 2 Latest Update Rated A+ what is value what people are willing to pay for (what the buyer pays) who said, "Value is what people are willing to pay for" John Naisbitt 2 primary types of valuation 1. relative valuation 2. intrinsic valuation relative valuation refers to what methods that compare the price of a company to the market value of similar assets intrinsic value refers to what the value of a company through fundamental analysis without reference to its market valu...

Discounted Cash Flow Model Exam Wallstreet Prep DCF implementation challenges • No real consensus on implementation – estimating cost of equity is controversial • Requires detailed company financials • Very sensitive to changes in operating, terminal value, and cost of capital assumptions • Garbage in = garbage out Levered vs. unlevered DCF • Before starting user must choose between two DCF approaches: 1. Directly value equity (levered DCF) 2. Directly value enterprise (unle...

Which of the following portfolios have the least risk? A) Treasury Bill B) Portfolio of long-term US Government Bonds C) Portfolio of US common stocks D) Portfolio of AAA-rated corporate bonds o :## A) - Portfolio of Treasury Bills Generally, IPO's are: o :## Underpriced Which of the following statements best describes shelf regulation? o :## Registration of the sale of securities in the primary market A new public entity issue from a company with public equity previously outstanding ...

What are the 6 basic steps of a DCF? 1) Project the company's free cash flow over 5-10 years 2) calculate the company's discount rate - usually WACC 3) Discount and sum up the company's free cash 4) Calculate the company's terminal value 5) Discount the terminal value to the present value 6) add the discounted free cash flows to the discounted terminal What is the difference between leveraged and unlevered free cash flows? Leveraged: includes interest expenses, interest income, and mandator...

Discounted Cash Flows Exam Questions With Verified Solutions A DCF values a company based on: - answerThe present value of its cash flows and the present value of its terminal value. Walk me through a DCF - answerFirst, you project out the company's financials using assumptions for revenue growth, expenses and working capital. Then you get FCF for each year which you sum up and discount to a NPV based on your discount rate, usually the WACC. Then you determine the company's terminal val...

ACF Advanced Valuation 2023/2024 verified to passValue a project that is 100% equity financed - correct answer 1. forecast incremental free cash flows from the assets 2. determine the risk of the cash flows (unlevered beta) 3. Use CAPM to find r(u) - the cost of capital and the appropriate discount rate for the cash flows of an unlevered firm 4. Calculate the NPV using the discounted cash flow formulas WACC Method - correct answer Discount the unlevered free cash flows using the r(WACC) ...

Intrinsic Value you value an asset based on it's intrinsic characteristics The Forever Loser Proposition for an asset to have value the expected cash flows have to be positive some time over the life of the asset The "It's Okay" Proposition assets that generate cash flows early in their life are more valuable What is the difference between equity valuation and firm valuation? Firm valuation looks at the entire business while equity valuation looks at the value of the equity's claims on t...

What are two benefits of making a compacted DCF model 1. Helps us learn the main features of a DCF model 2. Helps in a situation where we need a quick analysis What are two important dates in a DCF 1. Timing of the cashflows 2. Date of Valuation The time value of money is also called the _______ The time quantity of money What is the simplified formula to discount the cashflows Unlevered Free Cash Flow (UFCF)/ Weighted Average Cost of Capital (WACC) What are the three types of valuation tech...

Discounted Cash Flow analysis intrinsic method of valuation Based on the present value of the company's future cash flows Concept is based on the going concern principle in accounting that firms are expected to operate into perpetuity Firm total enterprise value = PV of FCFS + PV of terminal value, both discounted using WACC PV of fcfs, discounted using WACC + PV of Terminal Value, discounted using WACC = Implied Total Enterprise Value today FOUR major steps in performing a DCF analysis: 1...

Series 79 - Chapter 7 Discounted Cash Flow Analysis - correct answer Fundamental valuation methodology derived from the present value of its projected free cash flow (FCF) Free Cash Flow - correct answer Utilized in DCF and derived from a variety of assumptions and judgments about its expected financial performance, including sales growth rates, profit margins, capital expenditures, and net working capital (NWC) Intrinsic Value - correct answer Valuation implied for a target by a DCF. As ...