Financial Valuation Workbook : Step-by-Step Exercises and by James R. Hitchner

By James R. Hitchner

The source that cuts the training curve in part for valuation professionalsNow valuation pros can grasp virtually each functionality for many valuation occasions. The monetary Valuation Workbook, 3rd version publications readers via a whole company valuation with crucial instruments for speedy reference. up-to-date and increased bankruptcy at the means of getting ready a Valuation- purchaser Workflow systems from Read more...


The source that cuts the training curve in part for valuation pros Now valuation pros can grasp nearly each functionality for many valuation occasions. The monetary Valuation Read more...

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Weighted Average Cost of Capital Finally, we determined the WACC using the debt and equity rates that were already calculated. The equity discount rate is multiplied by an equity percentage, and the debt discount rate is multiplied by a debt percentage as determined based on average capital structure for a company in this industry. In this instance, an 80 percent equity weight and a 20 percent debt weight were determined from industry averages (illustration only). The percentages were then multiplied by the equity and debt discount rates calculated earlier (21 percent and 8 percent) and then summed to arrive at the WACC discount rate.

We have calculated both one-year and three-year multiples because of the cyclical nature of the industry. No adjustments have been made to the financial statements of the guideline companies, as we believe none are necessary here. EXERCISE 72: Which of these are commonly used guideline public company valuation multiples? a. b. c. d. e. f. g. h. i. Price/earnings Invested capital/revenues Price/gross profits Invested capital/book value of equity Invested capital/EBITDA Invested capital/EBIT Price/assets Invested capital/debt-free net income Invested capital/debt-free cash flow EXERCISE 73: When using the guideline public company method, at what point in time are the prices of the public companies’ stock valued?

C. The actual unadjusted amounts should be capitalized. EXERCISE 37: Assuming taxes are to be deducted, what two choices are there in making the tax adjustments? a. Tax each year historically, then determine the average. b. Taxes should never be deducted in the value of an S corporation. c. Make all adjustments in the historical period pretax, determine the average, then deduct for taxes. Three further adjustments were then made to the predebt and after-tax income. The ongoing depreciation that was deducted to calculate taxes was added back because it is not a cash expense.

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