Advanced Valuation Issues

To understand the theory behind more advanced valuation techniques used in company valuation, participants start with simple models, mainly in Excel. The advanced techniques are then applied to real company situations. The session identifies where the different techniques are most applicable and also where not to use them.

EVA valuation

• Reconcile DCF and multiples valuation mathematically
• Build a graph showing multiple lines for different combinations of growth rates and value gaps

Fade routines in DCF

• Using a fade routine in the terminal value calculation
• Difference between the return on invested capital (ROIC) and the weighted average cost of capital (WACC)
• Two stage steady state DCF valuation model

EVA valuation

• Illustrate how EVA is correctly calculated with both income statement and balance sheet adjustments
• Use the restated financials to build an EVA valuation model
• Compare the results to DCF methodology

Adjusted Present Value (APV)

• Illustrate how to build an APV model
• Discounting the tax shield on interest separately from the operational forecast
• Compare the results to a standard DCF model for a highly leveraged company

Alternative performance metrics

• Review the valuation metrics currently in vogue in equity research
• CFROI
• ROIC in merger situations