Finance

Question 1

Steps for Capitalized Cashflow

Answer 1

Income before tax
Add/Deduct:
Amortization 
Accounting adjustments
Unusual items
management salary adjust
Anything the new owners would have as an expense
Add interest on debt
= Estimated maintainable operating cash flow (Normalized EBITDA)

Estimated maintainable operating cash flow
- income taxes
= Maintainable cash flow from operations after tax
-Sustaining capital expenditures
\+ Present value of CC tax shield
=Maintainable discretionary cash flows
X capitalized rate
=Capitalized discretionary cash flows
\+ Present value of tax shield on existing assets
= Capitalized value of operations 
\+Redundant assets
- interest bearing debt
=Rounded value

Question 2

Steps for Adjusted net assets cash flow

Answer 2

Assets and liability adjusted to FV or NRV (prepaids no value)
Less foregone tax shield
less latent taxes/selling costs
=Net asset valuation

The difference between the capitalized cash flow approach and the net asset approach is the goodwill of the company

Question 3

Steps for a Quick Valuation

Answer 3

Net Income
\+- any identified adjustments
\+ Any indication of increased GM
- any indication of increased expenses
- potential investor salary
= adjusted net income
X market factor
= Market based valuation 
X % of ownership
= Value