Finance Valuation Questions and Answers

Finance Valuation Questions and Answers What is the money available to ALL of the firm's investors? EBIT What are the two relative measures of firm value? comparable firm analysis and precedent transaction analysis what is the intrinsic measure of firm value? discounted cash flow analysis comparable firm multiples = value measure / financial statistic Enterprise value = equity value + total debt + preferred stock + minority interest - cash what is enterprise value? a measure of a company's total value, alternative to equity market capitalization how can EV be thought of ? the theoretical takeover price if a company were to be bought why is debt added in to enterprise value? because a firm's debt would have to be paid off when bought market capitalization refers to the total dollar market value of a company's outstanding shares for cash flow generating assets, intrinsic value will be a function of the magnitude of the expected cash flows over the lifetime and uncertainty of receiving those cash flows how does DCF estimate intrinsic values cash flows are projected then discounted to reflect risk WACC uses what values for capital weights? Market values, NOT book values terminal value captures the remaining value of the firm beyond the projection period when valuing fixed assets, use: market prices, insured values, EAC when valuing inventory: value as the sum of the replacement cost of that portion which is being usefully added to the new firm and deeply discounted for the rest standard problems in valuing private companies - no market value for debt and equity - financial statements go back fewer years, have less detail why is the Market cap not always the most accurate way to value a company? because it doesn't take into account the price effects of cash holdings and debt obligations