TABLE
OF CONTENTS vii
Unit 8: Corporate Valuation Estimating Corporate Value
Introduction...............................................................................................8-1
Unit Objectives ........................................................................................8-1
Forecasting Cash Flows ........................................................................8-1
Free Cash Flow Calculation .......................................... 8-2
Assumption-based Cash Flow Forecasting ................ 8-4
Residual Value ........................................................................................8-7
Perpetuity Method.......................................................................8-8
Growing Perpetuity Method .......................................................8-9
Other Methods...........................................................................8-10
Summary....................................................................................8-10
Practice Exercise 8.1 ...........................................................................8-11
Discounted Cash Flow Method ...........................................................8-13
Placing Value on a Company ..................................................8-13
Summary....................................................................................8-18
Practice Exercise 8.2 ...........................................................................8-19
Other Valuation Methodologies...........................................................8-21
Price / Earnings Ratio ..............................................................8-21
Market / Book Ratio..................................................................8-23
Liquidation Value ......................................................................8-24
Dividend Value ..........................................................................8-24
Other Ratios...............................................................................8-25
Factors Affecting Value ........................................................................8-26
Market Liquidity.........................................................................8-26
Country Conditions ...................................................................8-27
Industry Conditions....................................................................8-28
Synergies...................................................................................8-28
Unit Summary........................................................................................8-29
Progress Check 8 .................................................................................8-31