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End User License Agreement
by Laura Zanetti, Gianfranco Gianfrate, Mario Massari
Corporate Valuation
Preface
A Roadmap for This Book
Acknowledgments
About the Author
Chapter 1: Introduction
1.1 What We Should Know to Value a Company
1.2 Valuation Methods: An Overview
1.3 The Time Value of Money
1.4 Uncertainty in Company Valuations
1.5 Uncertainty and Managerial Flexibility
1.6 Relationship between Value and Uncertainty
Chapter 2: Business Forecasting for Valuation
2.1 Introduction
2.2 Key Phases of the Business Plan Elaboration
2.3 What Drives the Preparation of a Business Plan?
2.4 The Main Methodological Issues
Chapter 3: Scenario Analysis
3.1 Introduction
3.2 What Is Scenario Analysis?
3.3 Difference between Scenario and Sensitivity Analysis
3.4 When to Perform Scenario Analysis
3.5 Worst and Best Cases and What Happens Next
3.6 Multi-Scenario Analysis
3.7 Pros and Cons
3.8 How to Perform Scenario Analysis in Excel
3.9 Conclusions
Chapter 4: Monte Carlo Valuation
4.1 Introducing Monte Carlo Techniques
4.2 Monte Carlo and Corporate Valuation
4.3 A Step-by-Step Procedure
4.4 Case Study: Outdoor Inc. Valuation
4.5 A Step-by-Step Guide Using Excel and Crystal Ball
Chapter 5: Determining Cash Flows for Company Valuation
5.1 Introduction
5.2 Reorganization of the Balance Sheet
5.3 Relationship between a Company's Balance Sheet and Income Statement
5.4 From the Economic to the Financial Standpoint
5.5 Cash Flow Definitions and Valuation Models
5.6 Business Plan and Cash Flow Projections
Chapter 6: Choosing the Valuation Standpoint
6.1 Debt and Value
6.2 First Problem: The Relationship between Leverage and Value
6.3 Second Problem: Alternative Valuation Techniques When Debt Benefits from a Fiscal Advantage
6.4 Third Problem: The Choice between an Asset-Side versus an Equity-Side Perspective
6.5 From the Asset Value to the Equity Value
Chapter 7: Leverage and Value in Growth Scenarios
7.1 Growth, Leverage, and Value
7.2 Nominal and Real Discounting
7.3 Problems with the Discount of Tax Benefit
7.4 Cost of Capital Formulas in Growth Scenarios
7.5 The WACC: Some Remarks
7.6 Real Dimension of Tax Benefits
Appendix 7.1: Derivation of the Formulas to Calculate the Cost of Capital
Appendix 7.2: Pattern of in a Growth Context: Some Remarks
Chapter 8: Estimating the Cost of Capital
8.1 Defining the Opportunity Cost of Capital
8.2 A Few Comments on Risk
8.3 Practical Approaches to Estimate Keu
8.4 Approach Based on Historical Returns
8.5 Analysis of Stock Returns
8.6 Analysis of Accounting Returns
8.7 Estimating Expected Returns from Current Stock Prices
8.8 Models Based on Returns’ Sensitivity to Risk Factors
8.9 The Capital Asset Pricing Model
8.10 Calculating RF
8.11 Calculating RP
8.12 Estimating β
8.13 Dealing with Specific Risks
8.14 Conclusions on the Estimation of the Opportunity Cost of Capital
8.15 Cost of Debt
8.16 Cost of Different Types of Debt
Appendix 8.1: CAPM with Personal Taxes
Chapter 9: Cash Flow Profiles and Valuation Procedures
9.1 From Business Models to Cash Flow Models
9.2 Cash Flow Profiles of Business Units versus Whole Entity
9.3 Examples of Cash Flow Profiles
9.4 Problems with the Identification of Cash Flow Models
9.5 Cash Flow Models in the Case of Restructuring
9.6 Debt Profile Analysis
9.7 Debt Profile beyond the Plan Horizon Forecast
9.8 The Valuation of Tax Advantages: Alternatives
9.9 Guidelines for Choosing Debt Patterns for Determining Valuations
9.10 Synthetic and Analytical Procedures Valuation
9.11 The Standard Procedure
Chapter 10: A Steady State Cash Flow Model
10.1 Value as a Function of Discounted Future Results
10.2 Capitalization of a Normalized Monetary Flow
10.3 The Perpetual Growth Formula
10.4 Formulas for Limited and Variable (Multi-Stage) Growth
10.5 Conclusions
Chapter 11: Discounting Cash Flows and Terminal Value
11.1 Explicit Projections
11.2 Estimation of the Terminal Value
11.3 Evaluation of Gas Supply Co.
Chapter 12: Multiples: An Overview
12.1 Preliminary Remarks
12.2 Theory of Multiples: Basic Elements
12.3 Price/Earnings Ratio (P/E)
12.4 The EV/EBIT and EV/EBITDA Multiples
12.5 Other Multiples
12.6 Multiples and Leverage
12.7 Unlevered Multiples
12.8 Multiples and Growth
12.9 Relationship between Multiples and Growth
12.10 PEG Ratio
12.11 Value Maps
Appendix 12.1: P/E with Growth
Chapter 13: Multiples in Practice
13.1 A Framework for the Use of Stock Market Multiples
13.2 The Significance of Multiples
13.3 The Comparability of Multiples
13.4 Multiples Choice in Valuation Processes
13.5 Estimation of “Exit” Multiples
13.6 An Analysis of Deal Multiples
13.7 The Comparable Approach: The Case of Wine Co.
Appendix 13.1: Capital Increases and the P/E Ratio
Chapter 14: The Acquisition Value
14.1 Definitions of Value: An Overview
14.2 Value Created by an Acquisition
14.3 Value-Components Model
14.4 Further Considerations in Valuing Acquisitions
14.5 Acquisition Value of Plastic Materials Co.
14.6 Acquisition Value of Controlling Interests
14.7 Other Determinants of Control Premium
14.8 Acquisition Value in a Mandatory Tender Offer
14.9 Maximum and Minimum Exchange Ratios in Mergers
14.10 Exchange Ratio and Third-Party Protection
Appendix 14.1: Other Value Definitions
Chapter 15: Value and Prices in the Market for Corporate Control
15.1 Price Formation in the Market for Control
15.2 Benefits Arising from Acquisitions
15.3 From the Pricing Model to the Fair Market Value
15.4 Fair Market Value Estimated Adjusting Stand-Alone Cash Flows
15.5 Premiums and Discounts in Valuation
15.6 The Most Common Premiums and Discounts
15.7 Value Levels and Value Expressed by Stock Prices
15.8 Estimating Control Premiums
15.9 Estimating Acquisition Premiums
15.10 Acquisition and Control Premiums in a Perfect World
15.11 Estimating the Value of Controlling Stakes: An Example
15.12 Minority Discount
15.13 Discount for the Lack of Marketability
15.14 Definitions of Value and Estimation Procedures
Chapter 16: Valuation Considerations on Rights Issues
16.1 Introduction to Rights Issues
16.2 Setting the Subscription Price
16.3 Value of Preemptive Rights
16.4 Conclusions
Chapter 17: Carbon Risk and Corporate Value
17.1 Why Carbon Risk Matters
17.2 From Carbon Risks to Carbon Pricing
17.3 Incorporating Carbon Risks in Corporate Valuation
17.4 Carbon Beta
Index
End User License Agreement
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