ADVENTIS FMC LEVEL II WITH 100% CORRECT ANSWERS.

Two main types of valuation methods? Relative and intrinsic refers to methods that compare the price of a company to the market value of similar asset Relative Valuation Brainpower Read More Previous Play Next Rewind 10 seconds Move forward 10 seconds Unmute 0:01 / 0:15 Full screen refers to the value of a company through fundamental analysis around its ability to generate cash flow Intrinsic Valuation In an M&A context, Enterprise Value is analogous to? Transaction Value In an M&A context, Equity Value is analogous to? Purchase Price Two primary types of relative valuation? comparable company analysis and acquisition comparables analysis Why do we use unlevered free cash flow in a DCF model? 1.) Represents cash flow available to all investors 2.) Not affected by cash flow and does not include interest expense Why do we use tax affected EBIT instead of Net Income? the valuation of a company should not be dependent on capital structure. Because interest expense is subtracted from EBIT to arrive at net income on the income statement, applying a corporate tax rate directly to EBIT without subtracting interest expense eliminates the impact of capital structure to cash flow How to calculate free cash flow Tax Affected EBIT + D&A + Working Cap + CapEx First step in determining the present value of a company calculate the present value of each year's unlevered free cash flow Second step in determining the present value of a company calculate the present value of all cash flow beyond the projection period Two methods for calculating cash flow beyond current projection period Perpetuity approach and Exit EBITDA Multiple approach