Free valuation e-book
We started preparing an e-book on valuation back in August 2012. We are publishing the previews below, starting with Chapter 2 (as Chapter 1, the introduction, will be published last). Do let us know your comments.
Chapter 2: DCF valuation
Chapter 2 consists on a description in detail of the Discounted Cash Flow method of valuation and answers the following questions:
- What is the Discounted Cash Flow method?
- When should it be used?
- What are the advantages and disadvantages of the DCF method?
- How is a DCF valuation structured?
We tried to cover not only the why i.e. what are the advantages of the Discounted Cash Flow methodology but also the how i.e. in practice, what steps are required to build a credible DCF valuation.
The preview can be downloaded here: Modelling Innovation – Chapter 2
Chapter 3: Free Cash Flows
Chapter 3 focuses on describing how to estimate Free Cash Flows and the Final Value, answering the following questions:
- How are Free Cash Flows calculated?
- How is the EBITDA Determined?
- What are a Company’s Key Performance Indicators?
- Relation between a sector’s cycle, the valuation period and projected value.
The preview can be downloaded here: Modelling Innovation – Chapter 3
Chapter 4: Weighted Average Cost of Capital
Chapter 4 focuses on describing how to estimate and calculate Weighted Average Cost of Capital, answering the following questions:
- How is the WACC calculated?
- What is the Cost of Debt, Cost of Equity and Beta?
- What is the Market Risk Premium and Country Risk Premium?
- What is the periodicity of WACC calculation?
The preview can be downloaded here: Modelling Innovation – Chapter 4
Chapter 5: Net present value of cash flows
Chapter 5 focuses on describing how to estimate and calculate Net Present Value of Free Cash Flows, answering the following questions:
- What is the Mid-Period Convention
- How to calculate the NPV of FCF.
- Practical example on valuation of company project.
The preview can be downloaded here: Modelling Innovation – Chapter 5
Chapter 6, comparable companies analysis
This type of analysis is frequently used in capital markets and by practitioners in general. In this preview we go through the various steps needed to develop this type of valuation, including a detailed example based on pharmaceutical companies.
You can download the preview here: Modelling Innovation – Chapter 6
Chapter 7, analysis of past transactions
In this chapter an analysis of precedent transactions is described and then performed on the previously analysed pharmaceutical big companies. The data compiled is public and accessible so that the reader can replicate the method without any data restrictions.
You can download the preview here: Modelling Innovation – Chapter 7
Chapter 8, free cash flow to the equity model
In this chapter a method of valuation using FCFE is described. The main highlight that differentiates this model from the previously described models is the careful use of the FCFE, being commonly confused with the amount of dividends paid to shareholders and the fact that this models uses only up to 11 inputs which simplifies further the valuation of the analysed company.
You can download the preview here: Modelling Innovation – Chapter 8
Articles
“Stop obsessing about the next black swan and innovate“, short article written with Sónia Pereira Coutinho and published in Bureau van Dijk’s M&A Portal, 2012.
“Morals And The Takeover Code Do Not Always Mix“, short article published in Bureau van Dijk’s M&A Portal, 2011.
“Private Equity Transactions in Portugal“, Contraditório Working Paper 10/03, 2010.
Innovation Models 