【文章內(nèi)容簡介】 stakes when calculating enterprise value versus equity value Document number 24 Value of the firm Value of the firm Value of firm’s debt + Value of firm’s cash = Value of firm’s equity Discount free cash flows at the weighted average cost of capital. The result is the present value of both debt and equity, or the value of the firm Document number 25 Discounted cash flow analysis provides an estimate of Intrinsic value Analytical process ? Develop business analysis ? Evaluate risk and target capital structure ? Other adjustments Results ? Projected annual free cash flows ? Estimated terminal value ? Appropriate weighted average cost of capital ? Risk adjusted present value of free cash flows and terminal value Total firm value ? Net present value of nonoperating and offbalance sheet assets Value of Common ? Less debt ( of cash) and preferred stock Document number 26 DCF requires indepth business analysis Industry outlook Competitive position Reinvestment needs Expansion opportunities ? Anticipated industry growth ? Major opportunities/risks ? Pricing flexibility ? Possible market share changes ? Cost structure ? Working capital ? required capital expenditures ? Discretionary investments ? New products/stores/format ? Development costs ? Economies of scale Document number 27 The DCF method is based on three key value drivers + TV FV = ? n i=1 FCFi (1 + WACC)i Firm value (FV) 1 Free cash flow to firm (FCF) Weighted average costs of capital (WACC) Terminal value (TV) 2 3 The DCF Model estimates a firm’s value by discounting the firm’s expected cash flows at a rate which reflects the riskiness of the flows. Document number 28 B. Discount cash flow (DCF) B1. Cash flow B2. Discount rate and WACC B3. Terminal value B4. Common DCF Qamp。A Document number 29 Determination of cash flows Earnings before interest and taxes (EBIT) – Taxes1) + Depreciation 177。 Change of provisions 177。 Change of working investment = Operating cash flow + Desinvestments – Investments = Free cash flow (to Firm) 1) Calculated figure (not the actual taxes) for a fully equity financed pany Document number 30 Working cash balances + Accounts Receivable + Inventory + Other Current Assets Accounts Payable Accrued Liabilities Other Current Liabilities = Net working investment Changing working investment Net working investment (NWI) ? NWI is the balance of the accounts in the current portion of a pany‘s balance sheet that move with normal business activity (., move with sales) and operating decisions, but not with financing decisions. ? NWI represents the investment in current assets and liabilities required to support sales. ? NWI differs from ―Working Capital‖ which includes other accounts that do not necessarily move with sales, such as cash and shortterm debt. Source: Roland Berger Analysis Document number 31 NWI is useful because it helps us to understand the business of target pany ? Focus on the operating aspects of the business independent of discretionary financial decisions (., changes in cash and shortterm debt) ? Better understand how an industry works by analyzing its NWI ? Identify changes in the management of the business as well as changes in the business environment ? Understand how a particular pany works by paring its NWI to your expectations and its petitor‘s NWI ? Understand how a pany‘s performance is affected by business and industry cycles and seasonality ? Understand how management decisions (such as trade policies, accounting practices, buying and selling a business, etc.) can affect a pany‘s NWI ? Forecast a pany‘s investment requirements to support future sales, which affect a pany‘s debt capacity and valuation Source: Roland Berger Analysis Document number 32 However, there are some industries where NWI dose not apply Utilities Banks and insurance panies Securities firms ? The industry uses some unusual accounting practices due to government regulation and industry specific financial reporting standards. ? Banks and insurance panies do not invest in receivables and inventory as we think of them for nonfinancial services panies. ? It is difficult to distinguish current from long term assets and liabilities, given that assets are markedtomarket daily and are quite liquid. Source: Roland Berger Analysis Document number 33 Some business are sensitive to various cycles and by understanding these will have accurate forecast of NWI Cycles impact NWI Seasonality ? Seasonal panies sell a relatively high proportion of their annual sales in one season. – Department stores, for example, do most of their year‘s business during the December holiday season. ? Simply looking at the annual financial statements will not disclose this. Seasonality can be better determined by looking at quarterly reports. Business cycle ? Some panies‘ sales are sensitive to general economic conditions (. GNP) and their sales rise and decline during economic expansions and contractions. – It takes time for manufacturers to react to economic downturns, resulting in higher inventories. – Customers also tend to pay their bills more slowly, increasing receivables. These factors increase NWI/Sales. ? Remember to analysis how the pany performed during past business cycles. Industry cycle ? Some industries have cycles that are peculiar to it and are unrelated to the economy as a whole. – An example of this is the 36month poultry cycle. The cycle occurs as follows: As poultry farmers raise chickens, supply begins to outweigh demand, causing farmers to cut back their chicken produ