EV and Equity Value
EV if a company has 0 debt, 0 cash, $100 Equity Value.
What is $100?
EV is calculated as the sum of these two parts.
(Hint: neither is equity value)
What are the sum of PV of UFCFs and the PV of TV?
Weighted Average Cost of Capital;
WACC = COD*(D/(D+E)) + COE*(E/(D+E))
Change in net income if revenue increases by $100, with a 30% tax rate.
The effect on consumer spending given an increase in disposable income.
What is an increase?
Change in Equity Value if a company pays $100 in dividends, and repurchases $100 of shares.
What is a $200 decrease?
Using the exit multiple method, TV is found this way.
What is EM*Terminal Year EBITDA?
The discount factor for the UFCF of 2028, given we are 35% of the way through 2025.
What is 3.15 years?
How A, L, and SE change if the company expenses $50 of depreciation, with a 0% tax rate.
What is...
A: -$50
L: 0
SE: -$50 (OpEx-> Net Income -> Retained earnings)
A company is trading at $50 per share. It is announced that they will be acquired for 60 euros per share (1.10 USD = 1 euro).
The change in share price.
An increase of $16 per share.
A company's EV, probably, if EBIT is $100, D&A is $10, and all of their peers trade at 5x.
What is $550?
The Gordon Growth Model.
What is Terminal Year UFCF*(1+g)/(WACC-g)?
FDSO if Basic SO = 100, current share price = 10, WA exercise price of options = 5, options outstanding = 100.
What is 150 shares?
How $100 of amortization affects the I/S and CFS, given a 20% tax rate.
What is a $100 decrease in operating income, $80 decrease in net income, a $20 increase in OCF and total cash inflow.
A company has missed earnings 12 times in a row. This is the reason why the share price increased after releasing this quarter's missed earnings.
What is... for a number of reasons?
Change in Enterprise Value if the company sells a building for $100, then buys $200 of trucks using debt.
What is a $100 decrease?
The 5 elements between Implied EV and Implied Equity Value.
What are net debt, preferred stock, minority interests, capital leases, and overfunded pensions?
Why do we relever beta?
TO MITIGATE IDIOSYNCHRATIC RISK
How $100 of share repurchases using cash affects each relevant line-item the balance sheet, given $0.01 par-value.
This is why the market always dips following tariff news, then subsequently rebounds.
What is pessimism?
An increase in this results in increased P/E given stagnant equity value and net income.
What are dividends paid?
A miniscule change in this element has the largest effect on implied share price (of g, WACC, terminal year UFCF, discount factor)
What is WACC?
The formulas for unlevering and relevering beta.
BU = BL / [1+(1-T)(D/E)]
BRL = BU_Med * [1+(1-T)(D/E)]
How an issuance of 100 shares of $0.01 par-value sold for $10 per share, then a repurchasing of 1 share for $11, would be reflected on the balance sheet.
What is...
Common stock: +$1.00
APIC: +$999
Treasury Stock: +$11
Cash: +$1000 -$11 = +$989
If you were to invest in a company with a 16% projected premium, 11% COE, 1.0 Beta, 7% WACC, 7x EV/EBITDA, 14% cash-flow increase expectations, this number is the minimum return you would accept.
What is COE, 11%.