DCF

Question 1

Asset side valuation

Answer 1

E = EV - Net Debt (using FCFO/FCFF and WACC)

Affected by the capital structure of the company

Question 2

Equity side valuation

Answer 2

E (using FCFE and Ke)

Question 3

FORMULA: Equity (Asset side)

Answer 3

E=∑(t=1)^n FCFO/(1+WACC)^t +TV/(1+WACC)^n - ND

Question 4

FORMULA: Equity (Equity side)

Answer 4

E=∑(t=1)^n FCFE/(1+ke )^t +TV/(1+ke)^n

Question 5

FORMULA: Net Debt

Answer 5

ND=Total Fin. Debt – Cash and equivalents – marketable securities

Question 6

FORMULAS: g

Answer 6

g(1)= ROE*Retained profits(RR) 
g(2)= ROCE*Net Investment Rate

Question 7

FORMULA: ROE

Answer 7

ROE=ROCE+(ROCE-i)*D/E

Question 8

When ROE=ROCE?

Answer 8

if Net debt=0

If Debt >0 then ROE>ROCE (Leverage effect)

Question 9

FORMULA: ROCE

Answer 9

ROCE=EBIT(1-tx)/Capital employed=Nopat/Sales*Sales/CE

Question 10

FORMULA: TV

Answer 10

TV=FCFF(FCFO)*(1+g)/WACC - g (Asset side)

TV=FCFE*(1+g)/ke - g (Equity side)

Question 11

FORMULA: WACC

Answer 11

WACC=E/(D+E)(Ke )+D/(D+E)(Kd)(1-t)

Question 12

FORMULA: Kd

Answer 12

Kd= 𝑖 (1 − 𝑡)=(Interest Exp/Amount of debt)*(1-t)

Question 13

FORMULA: CAPM (Ke)

Answer 13

Ke=rf+β(rm - rf)

Question 14

FORMULA: Beta Unlevered

Answer 14

βu=β/[1+(1-t)(D/E)]

Unlever the beta of comparable companies

Question 15

FORMULA: Beta Leverade

Answer 15

β=βu x[1+(1-t)(D/E)]

*Relever with financial structure of the company to valuate