DCF, technical question

I am building the DCF of a multinational company reporting under GAAP, whose debt trade in multiple currencies. The BV of debt is translated to USD at the historical spot FX on the balance sheet.

Here are two adjustments I have in mind in the debt sweep, I would like to have the opinions of bankers out there regarding their usefulness.

  1. Converting the foreign debt at today’s rate to obtain the true weight of the liability. Does it make sense to do so? How can I automatize the process (without inputting manually EURUSD, CHFUSD, AUDUSD)

  2. Integrating a “yield curve” tab to the model, it would then automatically move the market value of debt with interest rates movements (Assuming a constant Fedfund+risk spread per issue). Any idea how to automatize the process? (FRED, anyone?)

Or connect the CUSIPs directly in Excel…?

Hope it makes sense.

Thank you very much.

1 - Yes, the liability should be adjusted to reporting currency at current rates. If a USD reporting firm has a CHF bond outstanding, you need to know how much USD it will take to pay that back. I’m a little skeptical that the company is presenting its foreign debt as you indicate, as that’s not US GAAP or IFRS compliant. The liability should be translated to USD at the spot rate on the balance sheet date, not on the historical transaction date. 2 - Not sure how the market value of existing debt is relevant to your cash flow analysis.

1-Ok I will recheck it.

2-EV is market value of debt. I tought that could be relevant in order to add precision. (Deconstructing EV/Ebitda multiple to extract a range of PPS)

Thank you for the comment.

dudeeee. im filipino too. low key is the cfa popular there? and do you live like a king? thinking of moving back once i get my racks on racks. and i cant really contribute much to your question as i dont know the rules, but i saw cebu and buko and had to check it out.

You should also include a terminal value approach, I prefer that to the EV multiple since it has more flexible (and realistic) assumptions.

The market value of debt can be more easily estimated than using a dynamic yield curve model. I don’t think that interest rates will have the biggest effect on MV, since they are mostly stable in any developed country. It will be too much work for little benefit.

Very funny hahaha

To be frank, the title is not very pursued here, and I do not know about the demand for charterholders (one test location in for the whole country).

Now, regarding ‘‘living like a king’’, it ain’t hard in relative terms! Imports are rather pricey, the cheap commodity is manpower!


I did, 5 years out. Thank you for the comment.