Damodaran on Valuation_ Security Analysis for Investment and Corporate Finance ( PDFDrive )
becomezero,andthatthetaxratewillapproachtheEuropean Union marginal tax rate of 33%: Afteryear5,wealsoassumethatthegrowthrateinop ...
Discountingtheterminalvaluebacktothepresentattoday’s costofcapitalandaddingthepresentvalueoftheexpected cashflowsduringthehigh-g ...
ILLUSTRATION 6.3: Valuing Target: Dealing with Operating Leases Targetisoneofthelargestspecialtyretailersintheworldand has acqui ...
YearOperating Lease Commitment 1 146 2 142 3 137 4 117 5 102 UsingTarget’spretaxcostofdebtof5.5%(basedon its synthetic rating of ...
Target’s balancesheet debt of$9,538 million was adjusted to include the present value of operating leases: Based on theadjusted ...
After year5, we assume that thebeta dropsto 1, leading to a reduction in the cost of capital to 7.58%. After year 5, we also as ...
stable-periodreinvestment rate and cost of capital that we estimated earlier: The terminal value is: Discountingtheterminalvalue ...
At theprevailing market priceof $57 in November 2005, Target looks significantly overvalued. ILLUSTRATION 6.4: Valuing SAP: Effe ...
Theoperatingincomeisadjustedbyaddingbackthe current year’s R&D expense and subtract ing the amortization of the research as ...
TovalueSAP,wewillbeginwiththeestimatesfor the five-year high-growth period. We use a bottom-up beta estimate of 1.26, and the e ...
5 weestimateacostofcapitalof6.62%.(Wealso droppedthemarginaltaxratedownto35%toreflect expected changes in German tax law.) Weass ...
Notethatthetaxratechangesinyear11,requiringustogo backtotheoperatingincomeinthatyear.Addingthepresent valueoftheterminalvaluetot ...
wewilldrawonaprinciplewelaidoutinChapter1.More detail,byitself,doesnotgeneratemoreprecisevaluesandin manycases,canbecounterprodu ...
Toestimatethereinvestmentneedsforthefirm,weusedthe sales-to-capital ratio of 1.5 (approximately the industry average)andthechang ...
increases from its currentlevel of 6.23% in year 5 to the industry average of 25% in year 10. The following table summarizes the ...
To compute the terminal value, we use the stable-period reinvestment rate and cost of capital estimated earlier: Addingthepresen ...
Whenaskedtoestimatecashflows,mostofuslookatcash flowsafterdebtpayments(freecashflowstoequity),because wetendto thinklikebusiness ...
thanequity?Willthevaluesforequityobtainedfromthefirm valuation approach be consistent with the values obtained from the equity v ...
Notethatthefirmhasnoreinvestmentandnogrowth.Wecan value equity in this firm by subtracting the value of debt. Now letusvalue the ...
3.Theinterestexpensesareequaltothepretaxcostofdebt multipliedbythemarketvalueofdebt.Ifafirmhasolddebt onitsbookswithinterestexpe ...
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