Firm Valuation Project Using DCF
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Your team of three to four people is going to value a firm of your choosing. You will approach valuation from several angles to produce a reasonable range of prices.
The basis of your model is the Capital IQ DCF Valuation template discussed in class. However, you are free to alter any aspect of the model as you see fit. Please note the following from a technical perspective:
The base model uses a multiple for the terminal value. Please remove this from your analysis and instead make assumptions about the Horizon Period cash flows. Value the Horizon using time-value of money analysis.
It is important to identify the Terminal Value (PV of Horizon as of last forecasted free cash flow date) even though you will ultimately discount it back to the valuation date. There are a few interesting side statistics related to the Terminal Value: the ratio of the TV to the last year of projected EBITDA and portion of the Enterprise Value that comes from the PV of the Terminal Value.
A sensitivity analysis is a must. I will let you decide what parameters are important and subject to noise. It is important to strike a balance between not doing enough and trying everything at the widest ranges possible.
Multiples from Comparable Firms
The basis of your model is the Capital IQ Company Comparable Analysis template discussed in class. Please repeat the analysis performed in class but feel free to add additional ratios, select/deselect peer firms, and take peer stats (i.e. the median of a particular ratio) as you see fit. For this section, I would like for you to find a nice way to present your work without overwhelming the reader with too many numbers. Visuals are always helpful.
Please note the following for your report:
For the presentation of your work, please prepare a very brief, no-fluff written presentation of your work. The structure should have a written introduction, body, and conclusion; as well as an Appendix including figures and tables. Be sure to refer to the Appendix in your writing. As an alternative, you may embed figures and tables in the body of your writing. While I have outlined three sections, it is important to present your work completely yet concisely. A good report should have a body that is between two and three pages with 1.5 spacing.
Your target audience is your manager who needs to know exactly what you did without wasting his or her time.
It is important that you make all key assumptions clear. A dump of the Capital IQ model would definitely be a disastrous presentation of your work.
I would also like you to submit your Excel work. For the DCF valuation, use one worksheet to retrieve the data and perform your analysis. Use a second worksheet to grab key values from the first to build presentable tables and figures. For the comps analysis, separate your worksheets like we did in class.
(Our team has already completed the DCF Analysis and Multiples analysis and all analysis and excel are attached below. I need you to combine these two analyses together into a formal body part of a report and also write a introduction and conclusion to form a complete report. )
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