# Study Session 9: Equity Valuation: Valuation Concepts

## Negative Minority Interests

HI,

A company pretend to do the account consolidation using the equity method (sum line by line). She have a 80% participation on a company that have negative equity (-800.000 EUR).

How should be the minority interests demonstrate in the consolidated accounts?

A) Equity (20%) Debit of 160.000 EUR (negative minority interests)? How should we interpret this negative value?

B) No recognition of these minority interests, placing the entire -800.000 in equity other variations?

## PVGO

Hi everyone,

I am struggling a bit with the computation of PVGO. I have seen 3 different approaches so far and I am trying to reconcile them:

1) V0=E1/r+PVGO (this is the formula I am familiar with)

2) V0=D1/r+PVGO (from one of Schweser Mocks)

3) Compute the difference between 1) and 2), from one of the CFAI Topic Tests.

## Equity TT - Green Snake, can anyone enlighten me on the implied LT div growth rate?

Hi everyone. I am kinda stuck on number 4 on the Equtiy TT(Green Snakes). Can anyone help me?

I simply cannot understand how the answer equation is derived to be ’ g = (r - g )/1 + d ‘.

Maybe my algorithm is wrong but my understanding is…

1. V0 = D0(1+g)/(r-g)

2. V0(r-g) = D0(1+g)

3. (r-g) = D0(1+g)/Vo

4. g = r - Do(1+g)/Vo

## Justified P/B

Does anyone know if the equation for the justified price-to-book ratio can be reconstituted using ROIC and WACC instead of ROE and the cost of equity in order to come up with a justified EV/Assets Ratio (or some variation of that)? My intuition says yes, but I wanted to hear from someone more experienced.

This question doesn’t have as much to do with the curriculum as it does in just helping me with my own conceptual knowledge.

## Equity - Bryan Yee

Q4. Why is this not solved as Multi - stage RI?

## Mock Am Q31 and 32

Why in Question 31 in Gordon Growth Model do we add the Small Firm Premium only and why in question 32 using macroeconomic Model we add Risk premia for both small firm and thin trading?

## Test Topic- Equity- McKinley

Regarding question 4. Isn’t core EPS have already made all necessary adjustments for non recurring item. But why is the answer showing otherwise.

## Levered/Unlevered Beta

Hi, I’m really confused with the question from CFAI online topic test, Western vignette, Q1.

In answer, we see next formula  , all my life I think we should also add *(1-t) in denominator.

Formula from Investopedia

http://www.investopedia.com/terms/u/unleveredbeta.asp

## Sustainable growth rate

The sustainable growth rate is the rate of dividend and earnings growth that can be sustained for a given return on equity, assuming that:

1. No additional external capital is raised

2. Additional debt may be raised, keeping the capital structure constant

3. Additional equity may be raised

2nd option is the correct answer. I understand 3rd option is definitely wrong, but i picked option 1. I thought SGR only stressed on growth via internally generated funds?