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DCF Model for A Company with No Debt
When doing a DCF model for a company with no debt & preferred stock, WACC will only consist of cost of equity. So, 1. Is the cash flow at the bottom just the free cash flow to equity? 2. Do we get implied equity value at the end or would it still be enterprise value? 3. If we get implied equity...
What general valuation approaches are important to credit analysis (asset management)?
For an interview I'm reviewing (among other things) the three broad methods and when to prefer one over another: Income-based/DCF (discounting FCFF by WACC, probably going to ignore Cap Earnings in time interest of time) Market-based (P/E, P/Sales, P/CF, EV/EBITDA, EV/Sales comaparables) Asset-based...
How to start a DCF/Stock Pitch
Hello all, I have recently finished a financial modelling course and would like to start to model DCFs as well as make stock pitches. Here are the current issues I am facing and hope to receive guidance on: 1. Which company do I select? There are so many companies that I do not know where to start....
Free Course Recommendations for Excel Modelling and Valuation
Hello, eager college freshman here trying to learn how to master excel for IB and all the like that would be helpful in applying to and working in IB. I know WSO academy have these, but as a college student, would prefer to complete it for free. Any recommendations and suggestions would be greatly...
New Debt Issuance in DCF
Hello all, When building a 3 statement DCF model, what assumptions should I use for new debt issuance? I know this doesn't impact UFCF and the overall valuation, but if I assume no new debt, the balance sheet will reach 100% equity by the end of terminal year. If I'm presenting a balance sheet it...
Working Capital
Hello all, I am currently doing an assignment and one of the assumptions is "working capital drivers stay the same". How would you interpret this? Thanks
Updating DCF with 10q
How do you guys update yearly DCFs when a company releases their 10q? Do you need to increase the frequency to quarterly or do you adjust the yearly assumptions? What other alternatives are there? Thanks
CF in LBO vs CF in DCF
Can someone please explain to me what is the difference between unlevered free CF in a DCF and unlevered free cash flow in a LBO? I would be very appreciated. Thank you!
Dynamic WACC
How would you model a dynamic WACC?
DCF Model Price Target
Hello, I was wondering if the price targets from a DCF Model were 1 year/present price targets, or 5 year targets? I was under the impression that its a 5 year target as thats how many years cashflows are generally estimated for. This is probably an extremely dumb question but I can't find an answer...
Consumer Groups - Deal Modelling
Curious to understand more about fellow consumer bankers’ modelling experience in deal scenarios. I’ve worked with a few clients who have advanced operating models which we overlay a few sheets to pull multiples and metrics cleanly, and that’s the full extent of the modelling. i’ve also had...
Can someone answer this Wind Farm DCF Modelling test? I will pay if i have to!
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Why don't you use a DCF when debt and working capital serve fundamentally different purposes?
On the M&I guides, they say that you don't use a DCF when debt and working capital serve fundamentally different purposes. The examples given are banks or insurance firms. Is the idea that since banks use debt as an asset instead of a liability their levered betas might not mean much and so no...
Modeling Asset Mngmt Fee
Recently was presented a case study that stated "GP charges an asset management fee" (you're put into the position of an LP). How do you go about modeling asset management fee. I deducted 2% of gross exit value. In my review, I believe asset management fee is an annual (if not quarterly) expense and...
Houlihan 2-Hour Modeling Test
Hi, I have an upcoming modeling test for an Associate position in HL's consumer group. Was told it would be a 2-hour DCF modeling test. Anyone have any experience with this specific test or any pointers? Wondering if it's more focused on building out a three statement model and simple DCF at the...
what is management ebitda? same as reported ebitda?
what does "management ebitda" mean? have seen that come up a few times. is that just the same as reported ebitda? and not adjusted ebitda? thanks so much team!!
DCF Question - Partial year CF
Say we have a company with a Dec FYE We are purchasing the company on 30 June 2022. We want to do a 10 years DCF Forecasted FCF at 31 Dec 2022 is $100M which will grow every year by $20M How do we adjust for a partial year valuation? Am I right to think we still set out the DCF using December Year...
How much do *really* you rely on DCF in PE?
I work in a credit shop and we usually undertake valuation analysis when lending against the total EV of the borrower, which in the last 5 years has been the only security we would get. We mostly used multiples and also we normally carry out a DCF that's just really an extension of our 3-statement...
Question about when you don't use DCF
Question from M&I Valuation question 3 (basic section): The answer given for why you wouldn't use a DCF in a valuation is "if the company has unstable or unpredictable cash flows or when debt and working capital serve a fundamentally different role." Could someone please explain why DCF isn't used...
Do you keep the discount rate constant in a DCF or decrease over the explicit forecast period?
Dear all, Should I decrease the WACC for a target in the explicit forecast period to reflect maturity or keep it constant? A decrease may be difficult to substantiate, whereas a constant discount factor would be overly simplistic? By constant I mean, ie 10% over 10 years with the change only...
Modelling Case Studies - Working through the material
Hey all, Recently completed a DCF case study for an interview, where they provided 5-6 equity research reports on a company, along with historical financials, and asked me to build a model and do up slides explaining if it's a yes/no on investing. I realise it's a pretty standard test, but it was my...
What kind of rent growth assumptions are you using for commercial properties in NYC?
I am creating a DCF for a mixed-use office/retail building in Brooklyn and I am trying to decide what are appropriate long-term annual rent growth assumptions to plug into Argus. Curious what other people are using. Office rents have been in decline since the beginning of Covid, and even prior to...
Incoming Summer Analyst looking for advice...
Hello everyone – I just got an offer from a BB to join as a Summer Analyst in 2023 (IBD - Classic). I wanna spend the next year making sure that I know everything necessary to perform well during the internship. What exactly should I be studying? This is what I got so far: Public Comps Modeling...
Temasek Interview - Case Study
Hi all, Have a case study round with Temasek (consumer/tech division) coming up, and I'm wondering if anyone here has had experience with this particular round. From what I gather, they'll most likely give you info on a company, and you need to build a DCF, possibly LBO. Looking to confirm this +...
DCF Valuation
I'm looking at an acquisition of a portfolio of assets - some already operational and others in the development process. Acquisition will be on a cash-free debt-free basis, but will subsequently be financed at closing with a new senior facility. Couple of questions just to make sure I'm on the right...
A DCF in need of a good scrub
Company: Norfolk Southern Corporation Industry: Transportation, logistics Sector: Railroads My main concerns about the model are as follows: What are the professional expectations are regarding the citation of references for the input assumptions; use a note or comment? In my exit multiple approach,...
Valuation of fixed assets as part of business valuation
Hello everyone, I work on valuation of private chemical production company and do have a question regarding valuation of fixed assets as part of business valuation. One of the company's subsidiaries rents a property building, where all production company's equipment is located. So i contemplating...
How to value properties overseas - DCF (?)
Okay so I have a DCF valuation problem/buyout problem. I'm basically valuating a company and as you guys may know you value the company itself and then add the value of the properties and that what I'm going to offer my seller. I have or can valuate the property that is in my home country but I...
DCF with subsidiaries overseas
Guys I really need your help. I'm new at this firm and I don't get much help, I most things by Googling or asking people I know. However, I took the biggest fucking project at the firm and now I need to do a DCF with multiple subsidiaries that I can't get data for, but that isn't the problem since I...
Help with DCF model
Hi guys, I'm a second year student and I have a problem with my DCF model which was prepared for my paper work at university. The problem is the following: % of Implied EV from TV is 87%. As far as I know, this is an extremely high percentage. That is why, I would like to ask you for your help. I...
Difference in FCF and FCFF DCF valaution
Guys, when do we use FCF ( CFO-CAPEX) and when do we use FCFF for DCF? I have seen people sometimes using FCF cash flows and discount them back to get EV.
FCFE - Add cash from BS to the PV of CFs?
As the title suggests, just wondering if you add cash + marketable securities from the balance sheet to the PV of levered cash flows when deriving the equity value of a company using the FCFE method. Thanks
FCFF vs. wacc - DCF
Hi people, I was wondering what effects the EV more? So for example 1% change in FCFF, what will result in the EV? And is an increase in FCFF always the best way to got, does the increase in FCFF somehow impact the wacc? Thank you guys in advance!
DCF and Future Share Price
So hypothetically if you calculate the fair value of the share price of a company to be $100 using the DCF model and a discount rate of 10% over a 10 year period, would that mean by the end of the ten years, if the actual share price of the company fell in line with your predictions, the share price...
Predicting D&A in the future
If you know the amount CapEX will grow by over the next 10 years, how would you predict how much D&A would grow by.
Using complex excel function in financial modelling (Accounting, M&A, LBO, Valuation)
Hey monkeys, I am training in excel and I was wondering by this question: When do we use for instance "index-match" or "sum-product function" in financial statements, DCF, LBO or even a Merger Model. Could you please give some real-life example ? Thanks,
How long to stretch a DCF?
Prospective Monkey here. At my college, my professor always talks about a 15 year DCF, which I find ridiculously long. There is barely any visibility 2 years out let alone 15. I was wondering how do people actually working at HFs frame their DCF assumptions and timeframe? And how valuable is it...
Dividends tax effect on DCF
Guys, I don't understand why DCF is not affected by dividends tax. Let's assume that dividend tax goes from 0% to 15%. FCFE is not going to change, what is the rational behind it? I guess that since shareholders are going to receive less dividends, the company's value should reduce somehow cause...
Facebook's future estimates at its IPO
Hello everybody! I'm writing a thesis about Facebook's valuation over time. I want to build a DCF using the POV of a person who wanted to invest in the IPO (2012) just to see how a sensitivity table would have looked like. Is there a way I can find analysts' past estimates (even for just revenues)...
Normal level of detail in models?
Hi all - I work in a small boutique that mainly advises on buyside M&A in the middle market. Currently in the midst of PE recruiting, and obviously reviewing my models as a result. I've come to realize that our models are....well kinda shit and all very high-level. For example, when we evaluate CIMs...
DCF Model Feedback
Hello, Not sure if this is the correct area to post this (I haven't been on here in ages) but I would like some feedback on my DCF model. The analysis tab has the financials from the SEC website. I analyzed the quarterly income numbers for two years and also the annual numbers for 5 years. This...
Do you use the Treasury Stock Method when calculating Ownership in an LBO test with Mgmt Option Pool?
I've noticed it seems that sometimes it's used, and sometimes it's not. On a model test, should it be used? Taking an example...assume: -Initial Sponsor Equity **= $100 (no mgmt rollover) -Exit Equity Value = $200 -Mgmt Option Pool = 10%, strike at initial sponsor equity -Shares Outstanding...
Internal Lateral Move - Need Help with Valuation Case Study
I'm making a lateral move within my company from operational finance/accounting to a FP&A role. As part of my application I have to do a case study. This is my first true "finance" role - take it easy. Case study is as follows: Given Selling company's P&L (3 years actual, 4 years forecast) - closing...
Modeling for Operating Leases
Hey all. This is my first post. I am an incoming SA at a MM IB . I have been practicing my modeling for this summer and have run into an issue regarding operating leases. GAAP and FASB have effectively begun to list them as debt on the BS ... I get that the correct conceptual trading comp would be...
WSO PE Interview Course - PaySmart Case Questions
Hello all, been prepping with the WSO course, and am working on the PaySmart case. I have two questions, one specific to this case, and one that's more general: (1) Minor point, but in the video solution, when projecting out the market share for US and Europe, Europe increases by the given 0.5%...
EY TAS Val vs Alvarez & Marsal Val
If you had to choose between the following two offers which one would you choose and why? Alvarez & Marsal Valuation Services - Sr. Assoc. - 20-25% year end bonus based off hours billed. EY TAS - Valuation & Business Modeling - Senior - 10% year end bonus, however EY is offering 10k more on the base...
Lateral Analyst 1 Hour Model Test
I have a superday coming up this week with an EB and they have scheduled an hour-long modeling test. Its for an analyst position and I was wondering if anyone had any prior experience with this in interviews or any recommendations on prep. Thanks in advance for the help!
DCFs no longer necessary?
I've been told by a couple of people (growth side, not value) that buyside analysts won't bother with DCFs anymore--instead they'll project revenue and earnings growth based on a variety of factors in a proprietary model. Is this commonplace?
Modeling Test?
I have a second round interview coming up for an IB analyst position. All I know from the recruiter is that it will be an hour long technical interview with the associate and that it will involve testing my modeling skills and knowledge- DCF , LBO etc. I am assuming this involves a modeling test but...
Why a lack of advanced modeling techniques? Anyone who uses probabilistic modeling justification for this?
From what I have seen, real estate modeling (at least on an asset level) seems to be relatively rudimentary in comparison to almost all other financial sectors, could anyone possibly speak to why very few firms utilize advanced modeling techniques and probabilistic modeling in real estate? Or if...
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