Term
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Definition
| revenue less variable costs( DM,DL,VOH, VS, etc.) |
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Term
| BE analysis (units and $) |
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Definition
BE units: (Fixed costs /CM per unit)
BE $ : (fixed costs /CM%) |
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Term
| Contribution margin analysis |
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Definition
| ensure to compare CM of product over revenue stream cycle as upfront costs may be incurred early but earn residual income into the future |
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Term
| Buy vs Leases determination |
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Definition
calculate NPV of each option to determine which option is the cheapest
buy considerations (cost, selling, maintenance, tax shield)
lease considerations (after tax lease payments * discount rate) |
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Term
| Buy vs leases qualitatives factors |
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Definition
| -Always need to discuss: -impact on covenants -cash flows (leasing lessens upfront cash burdens) -leasing easier if the company has trouble obtianing financing-leasing protects against severe decline in asset value -possible tax advantages: no capital lease for tax purposes so cash payments would be deductible, but not CCA -purchasing asset may provide more flexability (ownership) |
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Term
| FNCE quant wording in case |
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Definition
| see one note for great appraoch |
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Term
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Definition
| Going Concern Company? Yes: 1- adjusted net asset 2- capitalized earnings 3- capitalized cash flows 4- discounted cash flows Not Going Concern: 1- asset based liquidation approach |
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Term
| When to use capitlized cash flow/ earnings approach |
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Definition
Going Concern, active operating entity, historical cash flows indicitive of future performance
- are there differences between earnings and cash flows? yes use cash flows, no use earnings |
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Term
| When to use discounted cash flow valuation? |
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Definition
| Going Concern, active operating entity, historical cash flows not reflective of future operations |
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Term
| When to use adjusted net asset valuation? |
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Definition
| -Going concen, company not active operating entity |
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Term
| When to use asset based liquidation approach? |
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Definition
| -Company not going concern |
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Term
| Adjusted net asset approach |
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Definition
adjust all BV of assets for FMV and subtract liabilites for adjusted net assets balance
-deduct latent taxes/ selling costs
-deduct foregone tax shield |
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Term
| Capitalized earnings appraoch: |
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Definition
1- EBIT
2- Normalizations +/-
=3 normalized EBIT
-* average past years results and come up with high and low
4- less taxes
5= After tax cash flows
6-* earnings mutiple
7= capitalized earnings
8- add redundant assets
9= EV
10- less net debt
11=equity value |
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Term
| Capitalized Cash flow set up |
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Definition
1-EBITDA
2-normalizations
3=normalized EBITDA
4- compute average and wieghted average over past to determine high and low values
5- less taxes
6- less sustaining CAPEX (net of tax)
7= after tax cash flows available
8= apply cash flow multiple 1/ (wacc-g)
9=capitalized cash flows
10- add PV of tax shield + redundant assets
11= EV
12- less net debt
13= EQUITY VALUE |
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Term
| Discounted Cash Flow Set up |
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Definition
1-EBITDA for future forecast yeatrs
2- normalizations
3- normalized EBIDTA
4- less taxes
5-cash flows
6: less CAPEX and WC requirments if any
7- free cash flows available
8- last year expected to be steady and idicative into future on steady growth apply mutiple (gordon growth) to FCFn *(1+g)/(r-g)
9- NPV all values to determine valuation
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Term
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Definition
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Term
| Capitalization multiple with capitalization rate given |
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Definition
| (1/cap rate)= cap multiple |
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Term
| Investment in company analysis (quant analysis) |
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Definition
-Consider FS adjustments first
- time to recover investment = cost of project / annual inflows
-IRR:undiscounted cash flows -->compate this to borrowing rate
-NPV
-LOC considerations
-Bank covenants: consider cimpliance with covenants
-Ensure to mention assumptions and risk if things do not go as planned (Qual for FNCE wording) |
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Term
| Investment in company qualitiatve analysis |
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Definition
-SWOT analysis
-key decisions making factors: projects, litigations, bank agreements, quant anlaysis, conflicting objectives |
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Term
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Definition
| the required expected return acts as the discount rate. In other words, discounting is merely the inverse of growing. |
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Term
| Decision to sell property and lease or do not sell it. How to analyze this |
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Definition
-calculate NPV analysis assuming that you sold it and are making leases payments.
-If positive NPV then sell, if negative don't sell. |
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Term
| things to consider in NPV for sell and lease vs don't sell |
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Definition
| 1-selling price + 2- commision - 3- lease payment - 4- tax savings on lease + 5- tax on capital gain - 6- tax on recaputre - 7- tax on CCA tax shield lost - |
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Term
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Definition
| estimate and move on -> boom 20% |
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