Tutorial Sheet 1.2 Fundamentals of Valuation Flashcards
With DCF, the value of an asset is derived by computing the (net) present value of the expected cash flows of the asset.
The Net present value (NPV) is the difference between the…
present value of cash inflows and the present value of cash outflows over a period of time.
Relative Valuation derives the value of an asset by …
Once the comparable(s) are identified, a Multiple m is computed for these assets. A common multiple is computed as follows: …
The value of the asset we are looking to value is determined by …
looking at the value of comparable assets
Enterprise Value / (EBITDA)
multiplying the observed KPI from our asset (e.g. EBITDA) with the Multiple m:
Valuation with options: Real Options
Valuation with Options is a … to assigning a value to an asset.
▪ Delayed decisions that are incorporated into investment decisions are referred to as real options.
-e.g., a firm can expand a project (e.g., production site) and has the…
-e.g., an VC investor has the chance to stage an investment into a venture in multiple rounds with a … (i.e., an anti-dilution clause in the case of a future financing round)
- e.g., an investor has the right to finance a sequel of …
▪ On the one hand, the flexibility is valuable and therefore, the real options have an…
▪ However, including real options make valuation much more complex since additional inputs are needed
probabilistic approach
flexibility to take this decision in the future
downround protection clause
a movie or video game at predetermined conditions
intrinsic value
Asset Based Valuation: Liquidation Value
Asset Based Valuation uses the … instead of intrinsic cash flows or comparables
This is used in various contexts:
▪ Liquidation valuation, where the …
▪ Accounting valuation, where … (fair value or goodwill estimation)
▪ However, the value of … must be known, and we are back to intrinsic or relative valuation!
▪ For instance, the liquidation value of a company is the amount at which it could sell all its (tangible and
intangible) assets and …
▪ This method is easiest when … exist
combined value of single assets (market prices)
price of assets for sale is derived
assets are valued for accounting reasons
single assets
repay liabilities on a rush basis.
distinct assets with stand-alone cashflows
