Professional Documents
Culture Documents
Presentation
Presentation
Topic Areas:
Introduction
Background Information
Multiple Analysis
Regression model Assumptions
Real Options
Assumptions Stealth Tier
Conclusion
Flowchart
Introduction
- Changes in the Cable Industry - Laura Martin demonstrates the drivers of value in the Cable Industry - Evaluation of the Multiple Analysis, DCF Analysis and the Real Options
Topic Areas:
Introduction
Background Information
Multiple Analysis
Regression model Assumptions
Real Options
Assumptions Stealth Tier
Conclusion
Flowchart
Multiple Analysis
Multiple Valuation involve the following steps:
1. 2. 3. 4.
Define the multiple Describe the multiple Analyze the multiple Apply the Multiple
Multiple Analysis
Advantages: Simple and Cheap Does not rely on forecasting Relevant Disadvantages: EBITDA inflates earnings Historical Data Subjective
Multiple Assumptions
Exhibit 2 shows the summary of financial data for selected comparable companies
Multiple Assumptions
Firms are similar in size, growth and return
R2 is the coefficient of determination which shows the strength in relationship between the two variables
Multiple Assumptions
EBITDA is calculated at the same period EBITDA only focuses on earnings and excludes interest, tax, depreciation and amortization which could have significant impacts on a company
Regression
Topic Areas:
Introduction
Background Information
Multiple Analysis
Regression model Assumptions
Real Options
Assumptions Stealth Tier
Conclusion
Flowchart
DCF Analysis
DCF Analysis involve the following steps: 1. 2. 3. Forecasting the expected cash flows Estimating the discount rate (WACC) Calculating the value of the corporation
DCF Analysis
Advantages: Clear, consistent decision criteria for all projects Quantitative, decent level of precision Not as vulnerable to accounting conventions Time value of money Disadvantages: Future rates = Unknown Lacks in Accuracy Decision made now Use of FCF Unknown, intangible factors are valued as zero
DCF Assumptions
Assumptions: WACC of 9.3%: unrealistic changes in market conditions and beta Terminal multiple value of 13: realistic conservative in comparison to Exhibit 6 EBITDA: unrealistic Income statement shows fluctuating figures but forecasted EBITDA shows growing at constant rate Asset Intensity ignores stealth tier
Topic Areas:
Introduction
Background Information
Multiple Analysis
Regression model Assumptions
Real Options
Assumptions Stealth Tier
Conclusion
Flowchart
Real Options
102 MHz, 17 Empty Channels 100% Capital Spending but < 100% Return Black Scholes Model (Refer to later slides) Flexibility in Real Options
Yes
Yes
No
The holder of a call option has the right to buy within a specific date at a specified price.
Coxs Call Option
Profit
$22.45 $23.67
Loss
Multiples - Compare multiples of companies who have incorporated the stealth tier
Topic Areas:
Introduction
Background Information
Multiple Analysis
Regression model Assumptions
Real Options
Assumptions Stealth Tier
Conclusion
Flowchart
Conclusion
Multiples
Valuations
Real Options
DCF
Conclusion
Multiples
Conclusion
DCF
Valuations
Real Options
Conclusion
DCF - Clear decision rule - Quantitative precision - Time value of money - Future rates - Lack of Accuracy - Intangible factors
Conclusion
Valuations
Real Options
Conclusion
Real Options
- Overcomes problem of Stealth Tier - Focus on changes in Technology