Equity Flashcards
1
Q
Residual Income and Toolbox
A
Toolbox:
- Define RI
- Calculate RI
- Forecast RI (accounting stuff)
- Understand basic model
- RI-GGM Equivalent
- 4 Continuing RI models (3 of them are one Fromula) –> between this and point 5 above, 5 operable models
- Why does it not work?
2
Q
EVA & MVA
A
3
Q
Leading and Trailing P/E Fromula and Notes - FS1
A
4
Q
FCInv Buildup
A
5
Q
Pvt Company Valuation - DLOC and DLOM - WILL BE ON EXAM
A
6
Q
FCFE and FCFF - MEMORIZE
A
- Same as DDM, but use FCFE1 (or FCFF?) / r-g instead
- FCFs not published, will need to calculate from stmts
- FCFE - USE REQUIRED ROE from CAPM instead of “r” from DDM
- FCFF - firm-wide, so use WACC (aka firm wide discount rate)
- REMEMBER: they’ll probably try to trip you up between FCFF and FCFE and which is the right one to use
7
Q
Estimating Beta
A
8
Q
Dividend Discount Models
A
- MOST questions on the exam from this slide
- DCF = for a non-control perspective
- FCFF / FCFE = for control perspective
- HP of N Years - just discount back holding and terminal cash flows
- GGM: AKA constant or infinite growth models
- Two-stage DDM:
- Dividends, rsidual income, & FCF - use for all of these
- DONT USE FORMULAIC APPROACH -> more of a prinpcle than a formula
9
Q
Residual Income Models - when RI fades over time
A
- No formula for omega - just how fast ROE will converge to r
10
Q
PEG Ratio
A
11
Q
FCF Supplementary Info Slide (non-mem)
A
12
Q
FCF 3 Crucial Things to know
A
- FCInv Formula:
- Given statement of cash flows (CFI)
- From Balance Sheet:
- FCInv = Ending net PPE - BGN net PPE + Depreciation - gain (loss) on sale of PPE
- Remeber that WCInv = BGN WC - END WC
- It’s the CHANGE in WC we are interested in
- Non cash charges (D&A), maybe impairments or change in DTL
13
Q
CAPM and Equity Risk Premium
A
- CAPM is MOST Used Formula on the exam!
14
Q
FCF Models
A
15
Q
Forecasting RI
A
16
Q
Calculate FCFF and FCFE from different Starting Points
A
- EBIT and EBITDA less likely - all lead to same place
- Don’t know what tehy give you - need to know how to extract from full statement
- these help with abbreviated data
*
- these help with abbreviated data
17
Q
Problems of Residual Income Models
A
18
Q
Private Company Valuation - Table for Premium / Discount
A
19
Q
Estimating ROE and SGR (useful for DDM)
A
20
Q
FS1 - P/B Ratio
A
TRAILING ONLY
21
Q
FS1 - P/CF Ratio
A
TRAILING Only
22
Q
FS1 - P/S Ratios
A
TRAILING ONLY
