Valuation Training (PowerPoint PPT)

This is a training document on business valuation. It gives an overview of major valuation concepts and issues, discusses alternative valuation methods and provides practical examples for business valuation.
It is particularly useful to financial analysts, MBA students, and consultants.

Valuation is a huge topic with many key issues to consider. This document dives deep into the cost of capital in DCF or discounted earnings, selection of market multiples, and adjustments. It also covers growth rates in earnings and cash flow projections, terminal value method, and calculation. Using several vantage points and avoiding false precision are emphasized to ensure robust valuation.

The analytical framework for valuation combines forecasts of economic performance with the cost of capital. Competitive position and management strategy significantly affect ROIC. This framework helps in understanding how strategic and competitive positioning impacts economic performance and valuation. The P/E ratio and other valuation metrics are derived from ROIC and growth.

Valuation using discounted cash flows (DCF) involves forecasted cash flows, application of a discount rate, and measurement of continuing value. The discount rate is typically the weighted average cost of capital (WACC). This method provides a clear picture of equity value by considering net debt and other factors.

Issues with ROIC include competitive pressures and expected changes in ROIC. The document examines how ROIC might move to WACC and the implications for terminal value calculation. It also looks at the sustainability of ROIC and growth, considering industry norms and competitive pressures over time. This section provides a detailed analysis of how to maintain growth and ROIC above WACC.