Essentials of Business Valuation - DayThis two-day intermediate course enables participants to achieve a solid overview of the fundamentals of business valuation. It lays the theoretical groundwork for how businesses are valued and applies these concepts to actual business valuations in the marketplace, using exercises and reference to historical cases. The student learning process should benefit from the asset management and corporate finance experience of the instructor. |
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| Individuals in credit, investment banking, corporate finance, aaccounting and sales and trading. |
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| No advance preparation required. Basic knowledge of economic and financial concepts.
A financial calculator is required for the course. |
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Students will be able to:- Describe shareholder value creation
- Create a framework for choosing the appropriate valuation technique
- Highlight the benefits and pitfalls of the different methods of valuation
- Calculate WACC and recognize the role of risk
- Value companies in special cases of LBO and option models
- Compare discounted cash flow methods with comparable analysis
- Recognize some key ethical and regulatory issues that affect valuation
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Day OneIntroduction to Business Valuation- Why determine a business valuation?
- How methodology affects results
- The role of the public markets in business valuation
- Common valuation methodologies
DCF Valuation- Using sensitivity analysis to improve the base case valuation
- Scenario analysis and Monte Carlo simulations
- Exercises
- Sensitivity of DCF valuations to the assumptions made
- DCF vs DDM
- Discounted method
- Growth rates
Determining the Weighted Average Cost of Capital (WACC)- Introducing the WACC equation
- Calculating the after-tax expected cost of debt
- Using CAPM to calculate the expected cost of equity
- Calculating the WACC
- Discuss the effect of leverage on WACC
- Cost of equity DDM
- Exercises
Determining the Terminal Value- Defining terminal value and its impact on the DCF valuation
- Methods for determining terminal value
- Example
Cash Flows- Cash flow vs. free cash flow vs EBITDA
- Reconciling free cash flow with the consolidated statement of cash flow
- Projections
- EVA
- Enterprise value in valuation
- Exercises
| Day TwoComparables Based Valuation Techniques- Why comparables?
- Absolute and relative
- Limitations and challengers of a Perr Group
- P.E, P/Book, PEG, ROE, DuPont
- Enterprise Value (EV) / EBITA EV / Revenues
- Uses of enterprise, price multiples, book value, DCF, EVA
- Operating multiples
- Multiples for special cases
- Exercises
LBO Based Valuation Models- Rationale
- LBO Structure
- Equity
- Mezzanine Debt
- Senior Debt
- Implications and valuations
Options Value Based Pricing- Implications of options in underlying value of the firm
- Options pricing models
- Example demonstration
- Advantages / disadvantages
Valuation Ethics and Independence Considerations- Objectivity, diligence, reasonable basis, conflicts of interest
- Independence Considerations
- General regulations and guidelines of organizations, such as the SEC, CFA Institute, and accounting firms
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| Clients who register for this course will receive a complimentary 4-month subscription to FT.com. The Financial Times is the world's most respected financial newspaper, providing a broad assessment on finance, business and the industrial sector. The move to the electronic version follows an ongoing review of our environmental responsibilities as a global business and as part of the Pearson group. FT.com also has features that are not available in hard copy, such as: Special Reports, Alphaville, editor blogs, education sections and much more! Subscriptions will start within 6-8 weeks of the start of class and are limited to one subscription per client. (Please note: as of May 1, 2011, the electronic subscription replaces the hard-copy 3-month Financial Times subscription.) |
Lunch is included for all students taking day classes. |
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