Chapter-1 (Strategic analysis, choice and implementation)
-PESTEL / SWOT / Porter’s five forces
-For risk, use factor/explain/likelihood approach
-Risk mitigation: TARA model
-Organizational Structure: Flat/Narrow, Centralization/Decentralization
-Marketing mix: 4P (Product, Price, Promotion, Place)
-Market positioning
-Supply chain management: Push process (demand forecast from historic sales) / Pull process (demand driven by
customers)
-CRM: 3 customer phases (acquisition, retention, extension)
-Business process re-engineering: Similar to ZBB/ Dramatic improvement to business processes
-Outsource peripheral activities
-HRM: Retain employees
-Platform economy: connecting seller and customers by digital means
Chapter-2 (Investment appraisal)
-Internal Rate of Return (IRR): Has 2 issues
-Modified Rate of Return (MIRR): To overcome IRR’s issue of assuming CF will be reinvested at the IRR rate, instead
of cost of capital leading to multiple IRRs
-Extended Rate of Return (XIRR): To overcome IRR’s issue of not considering when actual cash flow takes place.
Useful for a series of cash flows that are not annual (say every six months) or are irregular.
,-NPV
-Exchange Rate complication
-Foreign investment appraisal approach
-Complications with Foreign investment appraisal: Double taxation, Subsidies, Exchange rate restrictions
Chapter-3 (Finance)
-Bonds: Yield 1) Base rate 2) Credit worthiness 3) Liquidity & marketability of the bonds
-Calculation: 1) Flat yield 2) Gross redemption yield
-Yield curve
-Credit spread
-Modified duration: Determine the effect that a change in yields will have on the price of a bond
-Overseas finance: Factors are Yield, Tax, FX risk, Business risk, Guarantees
-Lease
-Financial reconstruction: 1) Leveraged capitalization 2) Debt-equity swap 3) Equity-debt swap 4) Refinancing 5)
Securitization
Chapter-4 (Business and securities valuation)
-Valuation of loss-making company: FV of NA, Discounted FCF
-Valuation of a startup: Discounted CF, Market based valuation
, -Business Valuation (Income based measures):
1) P/E Method: MV equity= P/E ratio * Earnings (PAT). This valuation adjusted downwards, if listed company data is
used to value an unquoted company, and adjusted upwards to reflect the values of synergy.
2) Dividend Valuation Model (DVM): Valuing minority shareholdings, Po= Do (1+g)/ (Ke-g)
3) Discounted earnings: MV= Earnings first adjusted then adjusted earnings discounted at cost of equity
-Adjustments include: Additional dep of FV assets, Adjusting director’s salary to reflect market rate, Removal of
one-off items, Removing estimates
-Business Valuation (Cash based measures):
1) Free Cash Flow (FCF): 2 ways:
FCF to firm
Discounted at WACC to get Enterprise Value (MV of Debt plus Equity) -> Enterprise Value minus MV debt= MV
Equity
FCF to equity
Below Incremental WCAP investment, deduct Interest and Dividend then Discount at Ke to get MV of Equity.
2) APV= Base Case NPV + Financial Side Effects, discount at Keu (ungeared) rather than WACC, changes financial
risk
-PESTEL / SWOT / Porter’s five forces
-For risk, use factor/explain/likelihood approach
-Risk mitigation: TARA model
-Organizational Structure: Flat/Narrow, Centralization/Decentralization
-Marketing mix: 4P (Product, Price, Promotion, Place)
-Market positioning
-Supply chain management: Push process (demand forecast from historic sales) / Pull process (demand driven by
customers)
-CRM: 3 customer phases (acquisition, retention, extension)
-Business process re-engineering: Similar to ZBB/ Dramatic improvement to business processes
-Outsource peripheral activities
-HRM: Retain employees
-Platform economy: connecting seller and customers by digital means
Chapter-2 (Investment appraisal)
-Internal Rate of Return (IRR): Has 2 issues
-Modified Rate of Return (MIRR): To overcome IRR’s issue of assuming CF will be reinvested at the IRR rate, instead
of cost of capital leading to multiple IRRs
-Extended Rate of Return (XIRR): To overcome IRR’s issue of not considering when actual cash flow takes place.
Useful for a series of cash flows that are not annual (say every six months) or are irregular.
,-NPV
-Exchange Rate complication
-Foreign investment appraisal approach
-Complications with Foreign investment appraisal: Double taxation, Subsidies, Exchange rate restrictions
Chapter-3 (Finance)
-Bonds: Yield 1) Base rate 2) Credit worthiness 3) Liquidity & marketability of the bonds
-Calculation: 1) Flat yield 2) Gross redemption yield
-Yield curve
-Credit spread
-Modified duration: Determine the effect that a change in yields will have on the price of a bond
-Overseas finance: Factors are Yield, Tax, FX risk, Business risk, Guarantees
-Lease
-Financial reconstruction: 1) Leveraged capitalization 2) Debt-equity swap 3) Equity-debt swap 4) Refinancing 5)
Securitization
Chapter-4 (Business and securities valuation)
-Valuation of loss-making company: FV of NA, Discounted FCF
-Valuation of a startup: Discounted CF, Market based valuation
, -Business Valuation (Income based measures):
1) P/E Method: MV equity= P/E ratio * Earnings (PAT). This valuation adjusted downwards, if listed company data is
used to value an unquoted company, and adjusted upwards to reflect the values of synergy.
2) Dividend Valuation Model (DVM): Valuing minority shareholdings, Po= Do (1+g)/ (Ke-g)
3) Discounted earnings: MV= Earnings first adjusted then adjusted earnings discounted at cost of equity
-Adjustments include: Additional dep of FV assets, Adjusting director’s salary to reflect market rate, Removal of
one-off items, Removing estimates
-Business Valuation (Cash based measures):
1) Free Cash Flow (FCF): 2 ways:
FCF to firm
Discounted at WACC to get Enterprise Value (MV of Debt plus Equity) -> Enterprise Value minus MV debt= MV
Equity
FCF to equity
Below Incremental WCAP investment, deduct Interest and Dividend then Discount at Ke to get MV of Equity.
2) APV= Base Case NPV + Financial Side Effects, discount at Keu (ungeared) rather than WACC, changes financial
risk
