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Factors impacting Perpetual Growth Rate in a DCF

Wizenius

Valuation is a complex art that requires a deep understanding of financial modeling and various influencing factors. One critical aspect is determining the appropriate growth rate for the perpetual growth phase in a Discounted Cash Flow (DCF) model. Take your career to new heights in the dynamic world of finance.

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Post 3 - Why does the conventional DCF not work for valuing a start-up/young firm?

Wizenius

Diversity in equity claims: In most of the cases of publicly traded firms with one class of shares, all equity claims on the firm are equivalent.

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M&A Blog #17 – valuation (Comparable Company)

Francine Way

As I mentioned in my valuation preparation post , Comparable Company is a valuation method that uses metrics of other similar businesses (same industry, size, geography, valuation multiples, etc.) Calculating the Equity Value and the per-share Equity Value - this number would serve as the base case share price valuation.

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M&A Blog #16 – valuation (Discounted Cash Flow)

Francine Way

As I mentioned in my last post, Discounted Cash Flow (DCF) is a valuation method that uses free cash flow projections, a discount rate, and a growth rate to find the present value estimate of a potential investment. The major steps of DCF are: Identify extraordinary, unusual, non-recurring items from the target’s 10-Ks and 10-Qs.

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Post 4 - Why does the conventional DCF not work for valuing a start-up/young firm?

Wizenius

Equity Value (today) = Equity Value at end of forecast period/ (1+Target rate of Return)^n 4) Because this is the valuation of the start-up before the VC invests his/her money in the business it is known as Pre-Money Valuation of the start-up 5) VC investors receive an equity share of the business in exchange for their investments.

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M&A Blog #20 – valuation (Dividend Discount Model - DDM)

Francine Way

For this valuation post, I wanted to talk about a valuation method that is making its way out of academia and into the real world, a method that is gaining popularity in the world of portfolio management. Projected Book Value of Equity at the end of the 15 years = from the proforma balance sheet that we developed in our DCF post.

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M&A Blog #15 – valuation (tools and data preparation)

Francine Way

Just as any home appraiser or credit officer does before going through the analytical exercise to produce a score for a home or a borrower, valuation professionals go through several steps of preparation before the actual exercise of producing a number that can be used as a value of a company. A 5- or 10- year historical data is preferable.

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