Study Session 11: Equity Investments: Free Cash Flow and Other Valuation Models
In Schweiser I have read the following: “Items affecting actual cash flow from operations are ignored when the EPS plus noncash charges estimate is used. For example, noncash revenue and net changes in working capital are ignored”.
I know that CFO excludes all noncash operations, but it doesn’t exclude changes in working capital. Is this an error in Schweiser book or misunderstanding from myself?
Maybe my question will seem rather simple, but I can’t understand the following.
please i need help on how to account for related parties transaction in DCF valuation ( Due from related parties)
should I treat them as a working capital or should i add them at the end of valuation when adding cash before reaching to the firm’s fair value
I can’t understand the answer. Why the value of the Debt is $700.000? Why not $500.000.
Thank you in advance.
Hi Does anyone know if following should be included in net working capital calculation for FCFF?
1) Deferred Tax and liabilities
2) other investments included in Current assets below cash & cash equivalents
3) Deferred income
please help a fellow candidate out! Your help will be much appreciated! Thanks
Do expected spot rates ALWAYS have to be BELOW current forward rates? Can they be above?
What i’m asking is.. when riding the yield curve = does it only refer to going LONG on a bond? You cannot go short in “riding the yield curve” ?
Hi guys, I have a question with Mendosa case - Question 6.
The answer said “residual income in year 5 = 5.4*1.155”.
I don’t understand why we need to multiply 1.155, rather than 1.154?
The residual income in Year 1 = Book value of equity in year 0 * (ROE - r)
Please give me some hints.
Quinton Johnston is evaluating NYL Manufacturing Company, Ltd. In 2017, when Johnston is performing his analysis, the company is unprofitable. Furthermore, NYL pays no dividends on its common shares. Johnston decides to value NYL Manufacturing by using his forecasts of FCFE. Johnston gathers the following facts and assumptions:
The company has 17.0 billion shares outstanding.
Sales will be $5.5 billion in 2018, increasing at 28 percent annually for the next four years (through 2022).
While calculating FCFF we add back after tax interest to it ( + int(1-t) ). By definition FCFF is the cash available to providers of the capital i.e equity holders and bond holders. So, shouldn’t we add back the whole interest to FCFF? Why don’t we include the benefit of tax saving due to interest in FCFF calculation?
(Eg: Let’s say there’s an owner, an equity holder, a bond holder, and a tax official standing side by side. The owner now distributes money to each of these in the following manner.
EBIT =100 ,
interest = 10 ( to bondholder)
I have a question regarding the calculation/timing of the terminal value. I searched through old AnalystForum threads, but could not find a concise answer.
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