07 DCF Valuation Modeling
What are the three most common valuation techniques and do they generate the same valuation result?
1. Comparable Company Valuation
2. Precedent Transaction Valuation
3. DCF Modeling Valuation
They generate different valuation results due to their difference in views, namely:
1. Market View
2. Buyer View
3. Your View
assumptions 'terminal' in the income statement
1. DEP = CapEx
2. Deferred Tax = 0
3. Current Tax = all taxes = EBT*t
cost of equity
= Rf + CRP + ERP
ERP = ß * MRP
MRP = Rm - Rf
ß = levered beta !!!
ERP = equity risk premium
MRP = market risk premium
CRP = country risk premium
Do we use the current capital structure or target capital structure for WACC calculations?
target capital structure
Do we use the BV or MV of equity in WACC calculations?
MV (market value)
How long do you need to forecast for in a DCF model?
Forever ('going concern')
==> discrete forecasts: 5-10y (FCFF)
==> TV forecasts: forever
tax shield = ...
... = unlevered current tax - levered current tax
unlevered ==> start with EBIT
levered ==> start with EBT