Assorted Flashcards
(30 cards)
What are some of the problems with SVA method of valuation? (5)
- Percentage assumptions may be unrealistic
- Information might not be easily available
- It may be difficult to establish competitive advantage period.
- Other models have been suggested with different value drivers.
- Large proportion is in the terminal value which is unreliable estimate.
What are the 7 key factors in shareholder value analysis
- Rate of sales growth
- Rate of corporation tax
- Operating profit margin
- Investment in non-current assets
- Investment in working capital
- Cost of capital
- Life of cash flows
Formula for calculating total equity value using P/E method
Total equity value = P/E ratio x Earnings (PAT)
Or Total value per share = P/E ratio x EPS
Then multiply by number of shares
What is Enterprise Value?
The MV of a company’s debt and equity
What are the advantages or using the EV/EBITDA multiple method of valuation? (4)
- Also takes into account the value of debt
- Removes the influence of different accounting depreciation policies
- Unaffected by the capital structure of a company
- It is relevant - EBITDA is a key statistic commonly used by investors
What is the formula for the PV of a perpetuity for a non-growing discount rate?
PV of perpetuity = Cashflow for period / Discount rate
What is dividend yield?
Dividend per share / Market value of a share
Step by step to calculate dividend yield valuation?
- Calculate dividend yield (dividend per share / MV of a share)
- Divide dividend yield by average dividend yield of similar company
- Less discount for non marketability (25% say)
whats the % to deduct for non-marketability when valuing a company through P/E ratio or dividend yield?
25%, say
In P/E ratio calculations, when you get your P/E ratio, do you multiply or divide it by the P/E ratio of the similar company(s)?
multiply it
What might businesses combine? (4)
- Synergy 2+2=5
- Risk reduction
- Competition reduction
- Vertical integration
Out of the following, which of these FX hedges can be tailored?
- Forwards
- Money Market
- Futures
Forwards and Money Market
(Futures are standardised contract sizes)
What is the key figure that is needed to be calculated when approaching a capital rationing question?
NPV per £ capital
What are the two things that an investor could receive through an ICO?
Shares or a utility token
Advantages of crowdfunding? (3)
- Gives access to startups that would struggle to secure more regular sources of finance
- Lots of investors, so attracts customers and build brand awareness
- Can be a quick process (30 days)
Disadvantages of crowdfunding? (3)
- Legal / advisory costs
- Fee is payable to the crowdfunding site
- Administrative costs of dealing with investor requests
How much equity might a VC investor look to receive?
Usually between 20 - 49.9%
Do VC investors get involved in the running of the business?
No, they provide advice and can influence management.
What is a green loan
A loan to specifically be used on green projects.
Do green bonds have to be used on sustainability linked and environmental projects?
Yes
What are the 5 types of financing green?
- Green loans
- Green bonds
- Green funds
- Sustainability linked loans
- Social bonds
What is a covenant for the purposes of debt finance?
Where the borrower must do something, or restricted from doing something to protect the lender’s position.
This may be something such as:
- Providing information
- Negative pledge: cant secure the same asset twice
- Financial covenant
- Restrictions
What is the =RATE used for?
Calculating redeemable debt (debentures that are redeemable in x years time)
=RATE(A,B,C,D) is used to calculate the cost of redeemable debt. What is A, B, C and D?
A = Nper = Number of periods
B = Pmt = The amount (of interest) paid in any single period. Multiply Debenture % by nominal value.
C = Pval = The PV of the asset (its market price) - THIS MUST BE MADE NEGATIVE
D = Fval = The future value (the amount paid at maturity)
