E&V
Concepts
Concepts
What is Enterprise value?
Represents the total value of a company’s core operations, for all funders – both equity holders and debt holders.
What is Equity Value?
Represents the value available to shareholders, specifically the market value of a company's equity or common stock.
What is the cost of Equity of preferred shares?
Dividend = 9USD a year
Market value of the share= 120USD
Kp=7.5%
Germany
Berlin
What are NCI´s?
Non-controlling Interest (NCI) is a subsidiary's equity not controlled by the parent firm. NCI represents a portion of the subsidiary's equity that the valuing company does not own
What is a Joint Venture?
Two or more persons form a legal entity (a joint venture) to pursue a project or business opportunity. Each joint venture partner: Contributes resources, Shares risks,controls operations and decisions
China
Beijing
What is WACC and what is the formula to calculate it?
Weighted Average Cost of Capital, represents the rate at which the company finances its assets. The cost of each type of capital is weighted by its percentage of total capital and then are all added together. The formula is:
WACC = (Wd * Kd*(1-tax rate)) + (Wp * Kp) + (Wce + Kce)
What is Beta?
Is a number that measures the expected change of a a stock price in proportion to movements in the index as a whole
Calculate WACC if:
Weight of Debt = 25%
Weight of Preferred Stock = 15%
Weight of Common Stock = 60%
Tax rate = 20%
Cost of Debt = 9%
Cost of Preferred Equity =12%
Cost of Common Equity =15%
WACC = 12.6%
Canada
Ottawa
What is the formula to calculate Enterprise Value from Equity Value?
Enterprise Value =
MV of Total Debt (Balance Sheet Debt)
+ Off-Balance Sheet Debt
- Cash & Equivalents
+ MV of Equity (Common Stock, Preferred Stock)
+ Non-Controlling Interests
- Joint Ventures & Associates
What is the formula to calculate Equity Value from EV?
Equity Value =
+ Enterprise Value
- MV of Total Debt (Balance Sheet Debt)
- Off-Balance Sheet Debt (e.g. Pensions)
+ Cash & Equivalents
- Non-Controlling Interests
+ Joint Ventures & Associates
What is the Enterprise Value if:
# shares outstanding = 1,505
Current market price = 200
Accounts payable =1,000
Short term borrowings = 2,500
Long term borrowings = 5,500
Cash & Equivalents = 2,000
Short -term investments = 1,000
NCI´s = 1,000
JV´s = 500
EV=306,500
Australia
Canberra
What is the Equity Value per Share estimated from a DCF model for 10 years of forecasted FCFFs:
Sum of PV of FCFFs 1 To 10 = 120,000
Terminal Value on Year 10 = 1,000,000
Discount Factor on Year 10 =0.40
Accounts payable =1,000
Short term borrowings = 15,000
Long term borrowings = 50,000
Cash & Equivalents = 5,000
Short -term investments = 7,500
NCI´s = 3,000
JV´s = 1,000
Number of shares = 5,750
Estimated Equity value per share of: $80.96
Uruguay
Montevideo