Business Valuation - Discounted Cash Flow

Describe the difference between cash flow and free cash flow.

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Define leverage in terms of its influence on the WACC.

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Determine the elements necessary to calculate the after-tax expected cost of debt.

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Describe the role of beta in determining the cost of equity. What are the different methods to calculate Beta? Explain giving examples

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Three most popular methods of valuing businesses are - DCF, Trade comparable or Multiples and Transaction Comparable.

Describe the factors that influence the choice of valuation method.

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Identify the impact of changes in

-value drivers (all the variables in FCF calculation),

-WACC and

-terminal value assumptions

on a base case valuation through sensitivity analysis. i.e. how does the value of the firm change with each of the factors mentioned above?

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What are the limitations of the DCF methodology.

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Refer Slides 78- of Investment Banking Module shared in your Google Classroom.

What do you think is the single most important reason to use EV/EBITDA ratio (refer slide 89) for Business Valuations?

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Refer to slide 92 of the Investment Banking Module.

Which Multiple, do you think, will be most appropriate to compute valuation for Hero Moto Corp? Why?

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If you bought a share of common stock, you would probably expect to receive dividends plus an eventual capital gain. Would the distribution between the dividend yield and the capital gains yield, be influenced by the firms decision to pay more dividends rather than to retain and reinvest more of its earnings. Explain.

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