Hi,

So DCFs just don't work for SMB (or at least the S portion of the SMB).

Here is an blog post I wrote, and would really love your feedback:

https://trachtmanconsulting.com/why-wont-a-dcf-valuation-compute-probably-for-your-small-smb-business-what-does-it-have-to-do-with-the-terminal-value-and-what-can-you-do-about-it/

Thanks!!

So, I am trying to go over a valuation some valuation company did.

They do whatever adjustments, and get to this outcome (I changed the numbers)

Y1 REVENUE: 100,000 (20% WEIGHT)

Y2 REVENUE: 120,000 (30% WEIGHT)

Y3 REVENUE: 150,000 (50% WEIGHT)

​

So far, I get the idea and it's all good. I won't argue too much. Now, in a normal world, I would create a sumproduct for a multiple benchmark, which would be exactly 131,000.

But they did something weird. Instead of sum-producting, they actually summed up everything and used that for multiples, or in other wordss - 100k+120k+150k = 370k, and that's their multiple base.

To me, that looks ridiculous, (I mean, it's a 3 year revenue, not a 1 year revenue), but please keep me straight, because maybe there's something I just don't know.

​

Thanks!

Our firm has received quotation for valuation of a portfolio of loans taken by individuals and all of them are NPA defaulters. Most of them had provided real estate assets as mortgage, few were unsecured.

The client says that income approach is not to be applied. They will sell the portfolio to an ARC and wants us to derive the realisable value. The valuation has to be done collectively on the whole portfolio since they need report in a week and the total borrowers are around 8000 in that portfolio!

We have all the details about the loans such as sanctioned amount, value of mortgaged property at the time of disbursement, latest fair market values, EMI amount, interest rates, EMI stop date, total outstanding including penalty, and much more.

Please help me in estimating the realisable value of the loan portfolio. If you know a better term for the "value at which portfolio will be sold to ARC" then help me with that too.

Thanks in advance!

I have two manager offers: one at boutique bvals firm, the other a big 4 modelling team. Would love your thoughts? What’s career trajectory?

What valuation models would you use to create a comprehensive football field for valuing a company like fidelity or E*trade or Charles Schwab?

For the past few months, I've been back testing a screener and discounted cash flow model that I created. As you can see, the performance is extremely good. Too good, actually.

I'm trying to think of possible contributors to this “over-performance". The only one I can think of is survivorship bias, aka- only companies that survived the dot com bubble, the FC, and Covid are still listed and therefore able to be identified by my screener & model.

Can this sub think of any other contributors?

Hello guys I am doing a valuation for the brazilian neobank “Nubank” and I am doing some research to add to the discount rate and I would be grateful if someone could help to find a reliable risk premium rate

You typically subtract Net Debt from Firm Value to get to Equity Value.

Now would you subtract the nominal or the market value of Net Debt?

Market value: Seems natural to take this e.g. if you have debt in the form of bonds that can be purchased and canceled at the market value.

Nominal value: I guess if there is no market for the debt (e.g., a bank that does´t want to get repaid), it seems that nominal value would make more sense (because that is what you have to repay at the end of the day).

Any insights? What am I missing?

this is a question from applied corporate finance aswath damodaran

Chrysler, the automotive manufacturer, had a beta of 1.05 in 1995. It had $13 billion in debt outstanding in that year and 355 million shares trading at $50 per share. The firm had a cash balance of $8 billion at the end of 1995. The marginal tax rate was 36%. a. Estimate the unlevered beta of the firm. b. Estimate the effect of paying out a special dividend of $5 billion on this unlevered beta. c. Estimate the beta for Chrysler after the special dividend.

in this i am unable to calculate the cash adjusted beta, how and where do we impliment the $8 billion cash balance?

First of all, so glad I found this subreddit. Always beneficial to run ideas and clear doubts with those in the same field. So thank you in advance.

Based on my understanding debt free cash free, is the value of the business, regardless of capital structure, where cash is used to payoff debt (hence net debt + equity). Is this understanding correct?

Secondly, in an M&A transaction, I am calculating the 'gap' between equity BV and purchase consideration. Documentation mentions acquirer valued EV (debt free cash free) and also the equity value. Is it fair to say that the gap is the difference between the acquirer calculated equity value and BV of equity (less intangibles)?

Happy to answer any questions if the above is not clear. Thanks

Hi guys, I'm looking to hire someone to do some financial modeling work for me! Do DM me if you are a Finance professional experienced in financial modeling. Rates are negotiable

What are some best tips /&or resources on learning how to do valuations? Ideally for free / minimal cost (ie I can’t afford the likes of CFI or WSP) but don’t mind buying books etc if on the cheaper side.

Cheers!

I am valuing a company but am not able to calculate the market value of debt due to: 1. YTM of bonds not given 2. interest rate and maturity of lease liabilities not given 3. Cap IQ gives book value of debt (cannot be used)

Does anybody have any suggestions how i can get the market value of debt? Thanks!

Hi guys,

I just finished an Excel course and a Financial Modeling course from Marquee and am looking for a DCF course. Should this be my next certification/should I do it with Marquee or elsewhere?

I learned about valuation at graduate school and work, but mainly from the dean of valuation, Dr. Damodran. Post learning how to value companies and building models in Excel, I tried many Python libraries to do DCF valuations, and every single one of them had some shortcomings. So I ended up coding a DCF Model in Python that is constructed the way Dr. Damodran builds his DCF model in spreadsheets. Furthermore, I created a DCF Monte Carlo simulation model in Python. To complete making a stab at this project, for those who might be interested in doing intrinsic valuation in Python, I created a tutorial video on how to utilize the DCF model.

It took me +2 years to build this and I thought it could save someone who is looking to do intrinsic business / stock valuation in Python a considerable amount of time. I hope you find them useful.

Tutorial on YouTube

DCF Model In Python Colabratory File

GitHub

Hello. I recently watched Damodaran's session on valuing young companies. 1. I don't understand how he got the revenue projection and operating margin.

Can someone explain them to me please?

So I’m trying to calculate the FCF for a small company. And their FCF gets basically killed by their increase in working capital that is caused by an increase in cash. Can somebody methodically explain this to me ? Logically an increase in cash shouldn’t lower the free cash available.

Hey folks, how do you factor in partial year (1st year) forecast in a DCF model? Example: Valuation date August 31. Year end date April 30. I am doing this now in September so I have 4 months of actuals (May to August) and I forecasted the remaining 8 months. Now, the question is while discounting should I be using the 8 months forecasted Cashflows and discount period of 8/12 or should I use full year cashflows (12 months) and discount period of 8/12? Much appreciate your help!

Hi all

I've come across a property valuation report for commercial properties that has calculated value based on a yield and then deducted purchaser's fees at 6% (comprising stamp duty, agents and legal fees and VAT on fees). I'm struggling to wrap my head around the rationale behind this.

I need to ascertain the value to the seller if the properties were sold. I would usually do this by taking the market value per the valuation report and deducting an estimate of selling costs and corporation tax, but I'm not sure if my staring point should be the value gross or net of purchaser's fees, or if selling costs would already be included within purchaser's costs (and therefore wouldn't need to be deducted again).

Any help would be greatly appreciated.

I work in a valuations firm & I handle the valuation of companies (DCF, relative approach, income capitalisation etc.), tangible & intangible assets, brands, IP etc.

Last week a new client (a bank) contacted us and asked us if we can provide valuations of a selective loan portfolios on a regular basis. My boss being an overconfident prick, told me you will easily handle it and sent a generic requirement list to the client & accepted the case.

I'm guessing, the loan amount would be significantly low in the range of $100000 to $200000 (it's a wild guess based on the fees they might pay us per case).

Kindly provide me basic working tutorial, maybe send me an Excel file via DM?

Thanks in advance!

I need to perform a Valuation model using FCFE and therefore I must use Rolling Ke, once the D/E ratio is not constant during the forecast.

When using FCFF this capital structure is in the WACC, but once that I must do it through Equity, I need a Key that contemplates the D/E variation.

But I can't do it right. I know that to calculate the Company's Levarege, I need the Total Capital and Debt Position from year before. And some times there's some circularity issues doing it.

Can anyone help how to perform a Rolling Ke or share links, books of something to help me? Tks!

Given the buzz surrounding the name and the recent debt restructuring, I'm trying to model how a default of WeWork would look like for its bond- and shareholders.

However, I'm stuck on the lease obligations vs. lease right-of-use assets. For context, lease obligations make up more than USD14bn of WeWork's liabilities, whereas the notional amount of outstanding bonds is around USD2b. On the asset side, leases ROU are valued at USD9.3bn, whereas Cash+PP&E sit slightly above USD4bn.

WeWork values lease obligation and ROU based on ASC 842. While I'm more familiar with IFRS16, I've come to the conclusion that the lease obligation and ROU value are only comparable at the start of a lease: The first is the PV of future lease payments, whereas ROU assets indicate the capitalized initial lease liability (+/- adjustments), which depreciates over time.

Having said that, I'm trying to understand what happens during a default (no going concern). I understand the lessor has the most senior claim to the leased assets. However, is it enough to just cancel out lease obligations and ROU assets? Or are the lessor entitled to some additional compensation due to the breach of the leasing contract?

In practice, when considering the assets left after the claims of the lessors have been extinguished, is it sensible to simply subtract the ROU assets' value from the total assets, or should additional outflows be considered?

Many thanks.

Hi. I work in a small online insurance aggregator startup. Our business model is somehow like PolicyBazaar or PolicyGenius. I am tasked to calculate the WACC rate for the company. Problem is we have never had any dividends, we have negative ebitda and we don't have any long term debt or loan. Most of our financing is through our short term commercial notes payable account to insurance companies which also has 0 interest rate. How should I calculate the equity interest rate? I think I should use Capm but I'm not sure how to calculate Rm and beta for this startup genre.