Approaches To Corporate Valuation Presentation
|Introduction to Approaches to Corporate Valuation|
|Corporate valuation is the process of determining the worth of a company.|
Various approaches can be used to determine the value of a company.
The choice of approach depends on the purpose of valuation and the availability of information.
|Market-based approaches rely on market prices and information.|
Comparable company analysis compares the target company with similar publicly traded companies.
Precedent transaction analysis examines the value of similar companies in recent acquisition deals.
|Income-based approaches focus on the company's ability to generate future cash flows.|
Discounted Cash Flow (DCF) analysis estimates the present value of future cash flows.
Earnings Multiples approach uses a multiple of earnings to determine the company's value.
|Asset-based approaches focus on the company's tangible and intangible assets.|
Book Value method calculates the value based on the company's net assets.
Replacement Cost method estimates the cost to replace the company's assets.
|Weighted Average Cost of Capital (WACC)|
|WACC is a commonly used method in corporate valuation.|
It considers the cost of debt and equity to determine the company's overall cost of capital.
WACC is used in DCF analysis to discount future cash flows.
|Adjustments and Assumptions|
|Valuation approaches require adjustments and assumptions.|
Adjustments are made to account for differences between the target company and comparable companies.
Assumptions are necessary to forecast future cash flows and estimate growth rates.
|Combination of Approaches|
|Valuation often involves using a combination of approaches.|
Different approaches can provide a more comprehensive view of the company's value.
The combination of approaches can help validate the valuation results.
|Limitations and Challenges|
|Valuation is subject to limitations and challenges.|
It relies on assumptions and forecasts which may not be accurate.
Market conditions and economic factors can also impact the valuation results.
|Sensitivity analysis helps assess the impact of changes in key variables on the valuation.|
It provides a range of possible values based on different scenarios.
Sensitivity analysis enhances the understanding of the valuation's sensitivity to various inputs.
|Corporate valuation is a complex process with various approaches available.|
The choice of approach depends on the purpose of valuation and the available data.
A combination of approaches and sensitivity analysis can provide a more robust valuation.
|References (download PPTX file for details)|
|Damodaran, A. (2012). Investment valuation: T...|
Pratt, S. P., Reilly, R. F., & Schweihs, R. P...
McKinsey & Company. (2020). Corporate Valuati...