Company Valuation
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The document discusses brand valuation and outlines several key points: 1. Initially, tangible assets were seen as the main business value, but recognition of intangible value like brands grew with the increasing gap between book and market values. 2. Brands are valuable assets that can be quantified and valued using various approaches like discounted cash flow analysis and calculating the brand's contribution to profits. 3. A five step process for brand valuation includes market segmentation, financial analysis, demand analysis, competitive benchmarking, and calculating the brand value.
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Basic Company Valuation
The document discusses the basics of business valuation, including defining valuation as determining the economic value of a business. It outlines several methods of valuation such as income-based approaches like discounted cash flow analysis and market-based approaches like comparable company analysis. The document also explains why valuation is important for mergers, acquisitions, disputes, and other scenarios. Key considerations in the valuation process are discussed such as justifying assumptions, accounting practices, and intangible assets.
Valuation
The document discusses various methods for valuing companies, including cost-based methods like book value and replacement cost, income-based methods like earnings capitalization and discounted cash flow, and market-based methods. It notes that valuation depends on factors like management, performance, projections, industry, and the transaction context. The valuation process involves considering financial and non-financial factors, using multiple models, and arriving at a valuation range. Special situations like multi-business companies, M&A, and cyclic businesses require tailored applications of valuation models.
Business Valuation PowerPoint Presentation Slides
Presenting this set of slides with name - Business Valuation PowerPoint Presentation Slides. The stages in this process are Business Valuation, Financial Analysis, Economic Valuation.
Business valuation
This document provides an overview of business valuation. It discusses key drivers of valuation like purpose and industry factors. It also covers valuation concepts like fair market value and intrinsic value. Common valuation methods are described such as income, asset, and market approaches. The document also discusses valuation of shares and intangibles like goodwill.
M&A Valuation and challenges
Mr. Chander Sawhney, Partner & Head – Valuation & Deals, Corporate Professionals shared his thoughts as a guest Speaker on M&A Valuation and challenges at a Business Valuation Masterclass organised by VC Circle on 31st August, 2016. Corporate Professionals acted as the event supporting partner.
• In case of a merger valuation, the emphasis is on arriving at the relative values of the shares of the merging companies to facilitate determination of the swap ratio, hence, the purpose is not to arrive at absolute values of the shares of the companies. The key issue to be addressed is that of fairness to all shareholders. There are established legal precedence for merger valuation methodologies:
• Valuer’s role is to incorporate case specific factors and use appropriate methodologies so as to determine a fair ratio
• Usually, best to give weight ages to valuation by all methods
• Market price method and Earnings methods dominate.
• It is observed that in case of M&A, the Valuations depart from the concept of “Fair Value” as elements like Distress Sale, Desperate Buy, Comparable Transaction Multiples come into play reflecting Price than Value.
About Corporate Professionals Valuation Practice
Corporate Professionals Capital Pvt. Ltd. is a SEBI Registered (Cat-1) Merchant Banker and has a successful track record of providing a broad range of M&A and Transaction Advisory Services. Our Dedicated Team has more than 10 years of rich Valuation experience and we have executed more than 500 Corporate Valuations for clients of International Repute across different Context, Industries and Boundaries.
To know more about Our Valuation offerings and how we can help you, please visit us at www.corporatevaluations.in or download our Valuation profile @ http://www.corporatevaluations.in/VALUATION_PROFILE.pdf
Business Valuation
Introduction to Business Valuation, Fair Market Value, reasons and elements of business valuation, methodologies of business valuation, case study on net asset value.
Modigiliani miller
The document summarizes the Modigliani-Miller approach to capital structure. Some key points:
1) According to MM, leverage will not affect a firm's value or cost of capital. There is no optimal capital structure.
2) The cost of equity will rise to exactly offset any savings from low-cost debt, keeping the weighted average cost of capital constant regardless of capital structure.
3) MM relies on the concept of arbitrage to argue that investors can substitute "homemade leverage" to achieve the same returns, keeping firm values and costs constant across different structures.
4) MM later incorporated taxes, recognizing debt provides a tax shield that lowers the weighted average cost of capital
Capital structure theory
The document discusses several capital structure theories:
- The Modigliani-Miller model establishes that firm value is independent of capital structure under certain restrictive assumptions.
- The trade-off theory recognizes that while debt provides tax benefits, it also increases financial distress costs at higher leverage levels.
- Agency theory suggests that debt can help reduce equity agency costs by limiting free cash flow.
- Signaling theory posits that capital structure decisions signal private information to investors.
- Overall, the optimal capital structure balances these factors and depends on firm-specific characteristics.
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Basic Company Valuation
The document discusses the basics of business valuation, including defining valuation as determining the economic value of a business. It outlines several methods of valuation such as income-based approaches like discounted cash flow analysis and market-based approaches like comparable company analysis. The document also explains why valuation is important for mergers, acquisitions, disputes, and other scenarios. Key considerations in the valuation process are discussed such as justifying assumptions, accounting practices, and intangible assets.
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The document discusses various methods for valuing companies, including cost-based methods like book value and replacement cost, income-based methods like earnings capitalization and discounted cash flow, and market-based methods. It notes that valuation depends on factors like management, performance, projections, industry, and the transaction context. The valuation process involves considering financial and non-financial factors, using multiple models, and arriving at a valuation range. Special situations like multi-business companies, M&A, and cyclic businesses require tailored applications of valuation models.
Business Valuation PowerPoint Presentation Slides
Presenting this set of slides with name - Business Valuation PowerPoint Presentation Slides. The stages in this process are Business Valuation, Financial Analysis, Economic Valuation.
Business valuation
This document provides an overview of business valuation. It discusses key drivers of valuation like purpose and industry factors. It also covers valuation concepts like fair market value and intrinsic value. Common valuation methods are described such as income, asset, and market approaches. The document also discusses valuation of shares and intangibles like goodwill.
M&A Valuation and challenges
Mr. Chander Sawhney, Partner & Head – Valuation & Deals, Corporate Professionals shared his thoughts as a guest Speaker on M&A Valuation and challenges at a Business Valuation Masterclass organised by VC Circle on 31st August, 2016. Corporate Professionals acted as the event supporting partner.
• In case of a merger valuation, the emphasis is on arriving at the relative values of the shares of the merging companies to facilitate determination of the swap ratio, hence, the purpose is not to arrive at absolute values of the shares of the companies. The key issue to be addressed is that of fairness to all shareholders. There are established legal precedence for merger valuation methodologies:
• Valuer’s role is to incorporate case specific factors and use appropriate methodologies so as to determine a fair ratio
• Usually, best to give weight ages to valuation by all methods
• Market price method and Earnings methods dominate.
• It is observed that in case of M&A, the Valuations depart from the concept of “Fair Value” as elements like Distress Sale, Desperate Buy, Comparable Transaction Multiples come into play reflecting Price than Value.
About Corporate Professionals Valuation Practice
Corporate Professionals Capital Pvt. Ltd. is a SEBI Registered (Cat-1) Merchant Banker and has a successful track record of providing a broad range of M&A and Transaction Advisory Services. Our Dedicated Team has more than 10 years of rich Valuation experience and we have executed more than 500 Corporate Valuations for clients of International Repute across different Context, Industries and Boundaries.
To know more about Our Valuation offerings and how we can help you, please visit us at www.corporatevaluations.in or download our Valuation profile @ http://www.corporatevaluations.in/VALUATION_PROFILE.pdf
Business Valuation
Introduction to Business Valuation, Fair Market Value, reasons and elements of business valuation, methodologies of business valuation, case study on net asset value.
Modigiliani miller
The document summarizes the Modigliani-Miller approach to capital structure. Some key points:
1) According to MM, leverage will not affect a firm's value or cost of capital. There is no optimal capital structure.
2) The cost of equity will rise to exactly offset any savings from low-cost debt, keeping the weighted average cost of capital constant regardless of capital structure.
3) MM relies on the concept of arbitrage to argue that investors can substitute "homemade leverage" to achieve the same returns, keeping firm values and costs constant across different structures.
4) MM later incorporated taxes, recognizing debt provides a tax shield that lowers the weighted average cost of capital
Capital structure theory
The document discusses several capital structure theories:
- The Modigliani-Miller model establishes that firm value is independent of capital structure under certain restrictive assumptions.
- The trade-off theory recognizes that while debt provides tax benefits, it also increases financial distress costs at higher leverage levels.
- Agency theory suggests that debt can help reduce equity agency costs by limiting free cash flow.
- Signaling theory posits that capital structure decisions signal private information to investors.
- Overall, the optimal capital structure balances these factors and depends on firm-specific characteristics.
Bond valuation
The document discusses various bond valuation concepts like coupon rate, current yield, spot interest rate, yield to maturity, yield to call, and realized yield. It provides examples to calculate these measures and explains how bond prices are determined based on factors like interest rates, time to maturity, and cash flows. Bond duration is introduced as a measure of interest rate risk exposure, and bond risks from default and changes in interest rates are explained.
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The document discusses key concepts related to financial reporting including:
1) Financial reporting provides formal records of a company's financial activities primarily for external users like shareholders and internal users like management. Annual reports contain key documents like directors reports and financial statements.
2) There are various forms of business organization but joint stock companies have features like limited liability, transferable shares, and elected management through directors.
3) The objective of financial reporting is to provide useful information to investors and creditors to make decisions about providing resources to an entity. Reports are limited and users need other sources of information as well.
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Capital structure theory
Signaling theory and window of opportunity theory are two theories of capital structure. Signaling theory suggests that managers have better information about a company's prospects than outside investors. Companies with positive prospects will avoid stock offerings, while those with negative prospects will want to issue stock to share losses. The window of opportunity theory proposes that managers time the market when issuing securities, such as issuing equity when stock prices are high and debt when interest rates are low. Capital structure choices also impact lenders and rating agencies.
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The document discusses the cost of capital and various methods for calculating it. It defines cost of capital as the required return on funds provided by creditors and shareholders. It then covers the cost of debt, cost of equity using the dividend growth model and CAPM, weighted average cost of capital (WACC), weighted average cost of equity (WACE), and differences between cost of equity and cost of debt. The cost of capital is important for investment decisions, capital structure, performance evaluation, and dividend policy.
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The document discusses capital structure, which refers to the mix of debt and equity used by a company to finance its long-term operations. It examines several factors that influence a company's capital structure choices as well as different theories about optimal capital structure. The Net Income Theory proposes that firms can maximize value and minimize cost of capital by using as much debt as possible. The Net Operating Income Theory argues capital structure is irrelevant to firm value and cost of capital. The Traditional Theory suggests an optimal debt-equity mix exists. Finally, the Modigliani-Miller Theory states that under certain assumptions, capital structure does not impact firm value or cost of capital, though when taxes are considered, more debt can increase value.
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This document discusses capital structure and the factors considered when determining a firm's optimal capital structure. It discusses several approaches to determining the optimal capital structure, including:
1. The net income approach, which argues that changing capital structure affects overall cost of capital and firm value.
2. The net operating income/Modigliani-Miller approach, which argues that changing capital structure does not affect overall cost of capital or firm value.
3. The traditional/intermediate approach, which argues that increasing debt initially decreases overall cost of capital up to an optimal point, after which further increasing debt increases overall cost of capital.
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The presentation slide is on stock valuation. We have tried to present the various techniques to stock valuation under which different methods are discussed with illustrations. Key concepts:
Zero Growth Model
Balance sheet Technique
Constant Growth Model
Two-stage growth Model
Feel Free to comment.
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The document discusses key concepts related to financial reporting including:
1) Financial reporting provides formal records of a company's financial activities primarily for external users like shareholders and internal users like management. Annual reports contain key documents like directors reports and financial statements.
2) There are various forms of business organization but joint stock companies have features like limited liability, transferable shares, and elected management through directors.
3) The objective of financial reporting is to provide useful information to investors and creditors to make decisions about providing resources to an entity. Reports are limited and users need other sources of information as well.
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The document discusses working capital, which represents a business's liquidity and ability to meet short-term debts and expenses. It defines working capital's key components and importance, outlines formulas for calculating optimal levels, and financing options. It then analyzes an Indian steel manufacturer's working capital cycle, current ratio, inventory levels, and compares it to peers. Recommendations include increasing creditors cycles, exploring factoring, and utilizing export financing options to improve liquidity.
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This document discusses the cost of capital and how to calculate it. It defines cost of capital as the rate of return a firm must earn on its investments to maintain its market value and attract funds. It then discusses how to calculate the costs of different sources of capital including long-term debt, preferred stock, common stock, and retained earnings. It explains how to calculate the weighted average cost of capital (WACC) and discusses weighting schemes. Finally, it discusses how to determine break points and calculate the weighted marginal cost of capital (WMCC), which can be used with the investment opportunities schedule to make financing decisions.
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- Securitization is the process of converting illiquid assets into liquid assets by pooling them and selling securities backed by the pooled assets.
- The key participants are originators, special purpose vehicles, investors, and servicers. Assets like mortgages, credit cards, auto loans can be securitized.
- Benefits include off-balance sheet financing for originators and returns for investors. Risks include collateral, structural, legal, and third party risks.
- India has taken steps to regulate securitization but lacks a comprehensive framework and standardization.
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The document discusses various financial ratios used to analyze the financial position of a business. It defines financial ratios as relationships between accounting figures expressed mathematically. Financial ratio analysis is used to study information in financial statements, ascertain a business's overall financial position, and interpret key information. The document then discusses various types of ratios including liquidity ratios, solvency ratios, activity ratios, and profitability ratios. It provides examples of specific ratios like the current ratio, quick ratio, debt-to-equity ratio, and return on assets ratio and how they are calculated and interpreted.
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A lease is a contractual agreement between a lessor, who owns an asset, and a lessee, who uses the asset. There are two main types of leases from an accounting perspective: operating leases and capital leases. For operating leases, the asset is not recorded on the lessee's balance sheet, while lease payments are expensed over time. For capital leases, the asset and liability are recorded on the lessee's balance sheet similar to a purchased asset. Leases allow companies to acquire assets without large upfront cash outlays and provide off-balance sheet financing advantages.
Capital structure theory
Signaling theory and window of opportunity theory are two theories of capital structure. Signaling theory suggests that managers have better information about a company's prospects than outside investors. Companies with positive prospects will avoid stock offerings, while those with negative prospects will want to issue stock to share losses. The window of opportunity theory proposes that managers time the market when issuing securities, such as issuing equity when stock prices are high and debt when interest rates are low. Capital structure choices also impact lenders and rating agencies.
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The document discusses various methods for valuing common stock, including calculating the present value of future dividends using the dividend discount model. It outlines three cases for the pattern of future dividends: zero growth, constant growth, and non-constant growth. Key valuation formulas and an example are provided. Additional stock features and components of the required return such as the dividend yield and capital gains yield are also examined.
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This document discusses various concepts related to investment returns and risk. It begins by defining return as income received plus capital gains. It then discusses the components of return including yield and capital gains. It provides a formula to calculate total return. The document then discusses various types of risk including market risk, liquidity risk, and foreign exchange risk. It also covers sensitivity analysis using range and standard deviation. Finally, it discusses portfolio returns and risks, and introduces the Capital Asset Pricing Model to relate expected returns to market risk.
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The capital structure of a firm refers to how it finances its operations through various sources of funds, including debt through bonds or notes, and equity such as common stock, preferred stock, or retained earnings. Capital structure planning is important for a firm's long-term survival by creating a strong balance sheet and allowing a firm to withstand losses. An optimal capital structure balances debt and equity to lower the cost of capital and maximize firm value. Leverage refers to using assets or funds with fixed costs to magnify earnings, and comes in operating, financial, and combined forms. Operating leverage is concerned with fixed costs in a firm's income, while financial leverage uses debt to potentially increase earnings per share.
99700905 cost-of-capital-solved-problems
The document provides solved problems related to calculating cost of capital. It includes examples of calculating cost of debt, cost of preference shares, and weighted average cost of capital (WACC) for companies based on information about their capital structure, dividend rates, issue prices of securities, tax rates, and other financial details. The problems cover a range of scenarios and teach the methodology for determining the effective cost of different sources of capital and the overall WACC.
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The objective of the course is to provide an understanding of both the theory of corporate finance fundamentals and how it applies to the “real” world. The main focus of this course is on the corporate financial manger and how he/she reaches decisions. We will cover many issues that are important to a modern financial manager including various advance topics in corporate finance fundamentals such as the essential concepts and understanding of the uses of financial statements and cash flows, ratio analysis, financial planning and growth, time value of money, bonds and stocks valuation, and project valuation.
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The document discusses the cost of capital and various methods for calculating it. It defines cost of capital as the required return on funds provided by creditors and shareholders. It then covers the cost of debt, cost of equity using the dividend growth model and CAPM, weighted average cost of capital (WACC), weighted average cost of equity (WACE), and differences between cost of equity and cost of debt. The cost of capital is important for investment decisions, capital structure, performance evaluation, and dividend policy.
bond and its types
A bond is a (written and signed promise) debt investment in which an investor loans money to an entity (typically corporate or governmental) which borrows the funds for a defined period of time at a variable or fixed interest rate (Coupon Rate).
Capital Structure Theories
The document discusses capital structure, which refers to the mix of debt and equity used by a company to finance its long-term operations. It examines several factors that influence a company's capital structure choices as well as different theories about optimal capital structure. The Net Income Theory proposes that firms can maximize value and minimize cost of capital by using as much debt as possible. The Net Operating Income Theory argues capital structure is irrelevant to firm value and cost of capital. The Traditional Theory suggests an optimal debt-equity mix exists. Finally, the Modigliani-Miller Theory states that under certain assumptions, capital structure does not impact firm value or cost of capital, though when taxes are considered, more debt can increase value.
Capital structure
This document discusses capital structure and the factors considered when determining a firm's optimal capital structure. It discusses several approaches to determining the optimal capital structure, including:
1. The net income approach, which argues that changing capital structure affects overall cost of capital and firm value.
2. The net operating income/Modigliani-Miller approach, which argues that changing capital structure does not affect overall cost of capital or firm value.
3. The traditional/intermediate approach, which argues that increasing debt initially decreases overall cost of capital up to an optimal point, after which further increasing debt increases overall cost of capital.
The document analyzes the assumptions and implications of each approach. It also lists factors
Stock Valuation
The presentation slide is on stock valuation. We have tried to present the various techniques to stock valuation under which different methods are discussed with illustrations. Key concepts:
Zero Growth Model
Balance sheet Technique
Constant Growth Model
Two-stage growth Model
Feel Free to comment.
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IMPORTANT: THIS IS NOT INVESTMENT ADVICE. Please read disclosures appearing in the Appendix of this presentation.
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I do not recommend to anyone relying on the PowerPoint slides for making any decision on whether to invest on Coca-Cola stock. These slides were published for potential employers to gain information about my educational background, not for financial advice.
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Company Valuation
- 1. VALUATION Of THE COMPANY 10/18/10 - BY ANKIT GOR
- 2. Brand Valuation 10/18/10 - BY ANKIT GOR
- 5. Introduction & evidence of brand valuation The increasing recognition of the value of intangibles came with the continuous increase in the gap between companies’ book values and their stock market valuations, as well as sharp increases in premiums above the stock market value that were paid in mergers and acquisitions in the late 1980s. 10/18/10 - BY ANKIT GOR
- 7. 10/18/10 - BY ANKIT GOR
- 8. 10/18/10 - BY ANKIT GOR
- 12. Social value of brands Brands are accused of stifling competition and tarnishing the virtues of the capitalist system by encouraging monopoly and limiting consumer choice. The opposing argument is that brands create substantial social as well as economic value as a result of increased competition, improved product performance and the pressure on brand owners to behave in socially responsible ways. 10/18/10 - BY ANKIT GOR
- 13. Social value of brands Competition on the basis of performance as well as price, which is the nature of brand competition, fosters product development and improvement. 10/18/10 - BY ANKIT GOR
- 16. Value of a brand N = ∑ RBt / (1+r)t + residual value/(1+r)n t = 1 = Anticipated revenue in year t, attributable to the brand r = discounting rate Residual value beyond year n RBn/r or RBn/r-g g= Rate of revenue growth 10/18/10 - BY ANKIT GOR
- 17. Multiple methods Market value of equity Firm : P/E = Known profits Brand equity Brand Multiple = Brand net profits 10/18/10 - BY ANKIT GOR
- 18. Stages to determine Brand Multiple 10/18/10 - BY ANKIT GOR
- 22. Means of evaluating brand strength 10/18/10 - BY ANKIT GOR Evaluation Factor Maximum Score Brand A Brand B Brand C Leadership 25 19 19 10 Stability 15 12 9 7 Market 10 7 6 8 Internationally 25 18 5 2 Trend 10 7 5 7 Support 10 8 7 8 Protection 5 5 3 4 Brand strength 100 76 54 46
- 23. S-curve 10/18/10 - BY ANKIT GOR
- 27. “ If this business were split up, I would give you the land and bricks and mortar, and I would take the brands and trade marks, and I would fare better than you.” -John Stuart, Chairman of Quaker (ca. 1900) 10/18/10 - BY ANKIT GOR
- 28. HUMAN CAPITAL VALUATION 10/18/10 - BY ANKIT GOR
- 41. Good will (Rs in thousands) 10/18/10 - BY ANKIT GOR March 31, 2008 March 31,2009 Balance ( beginning of the period) 23683549 27043223 Additions 3427020 10834 Valuation allowance reversals (67,346) - Balance ( end of the period) 27043223 27054057
- 42. Other intangible assets (Rs in thousands) 10/18/10 - BY ANKIT GOR Particulars March 31, 2008 Less Amortization March 31, 2009 Less Amortization Software 83,993 83,993 1,00,458 88,659 Bandwidth 20,96,218 96,346 33,63,064 3,07,261 Licences 63,59,042 29,87,002 63,59,402 34,27,900 Licence entry fees 1,08,16,027 31,15,513 1,08,97,940 36,97,713 Brands 1,10,514 92,250 1,10,514 94,990 Distribution networks 11,34,508 11,344,188 11,34,508 11,34,484 Customer relationships 7,28,840 7,23,639 7,28,840 7,28,004 Other intangibles 1,54,659 47,234 1,54,659 60,874 Total 2,14,84,161 82,80,165 2,28,49,385 95,39,885 NET 1,32,03,996 1,33,09,500
- 45. HUMAN RESOURCE VALUATION AT INFOSYS Assumption : cost of capital 12.18% (Rs. in crores) 10/18/10 - BY ANKIT GOR 2009 2008 Employees no. Software professionals 97349 85013 Support 7501 6174 Total 104850 91187 Value of Human Resources Software professionals 95600 92331 Support 6533 6490 Total 102133 98821
- 47. INFOSYS-BRAND VALUE Rs. in crores 10/18/10 - BY ANKIT GOR 2009 2008 2007 Profit before interest and tax 6907 5344 4245 Less: non-brand income 426 634 335 Adjusted profit before tax 6481 4710 3910 Inflation factor 1.0000 1.092 1.192 PV of brand profits 6481 5142 4660 Weighted factor 3 2 1 Weighted avg profits 5731 - - Remuneration of capital 801 - - Brand related profits 4930 - - Tax 1676 - - Brand earnings 3254 - - Brand multiple 9.94 - - Brand value 32345 - -
- 48. Infosys : Intangible assets Intangible Assets / Total Assets = 88.7% In Rs. in crores 10/18/10 - BY ANKIT GOR 2009 Total Assets 152732 Intangible assets Brand value 32345 Human Resources 102133 135478
- 49. Conclusion 10/18/10 - BY ANKIT GOR
- 50. 10/18/10 - BY ANKIT GOR