Finance exam outline
BUS 3303 Finance
Course review
Ale Previtero
AGENDA
1. Overview of valuation cases
2. WACC
• Cost of equity, choosing beta, choosing weights, when to
use premium.
3. Valuation using Discounted Cash Flow (DCF)
• Key assumptions, Terminal Value, sensitivity
4. Valuation using multiples
• Key points, pros & cons, choosing comparable firms
• Which multiple? Which year? Example.
5. Financing an Acquisition
• Determine price. Financing. Making a decision.
6. Final exam
• How to review, how to approach the case
1. OVERVIEW OF VALUATION CASES
CASE (Protagonist)
DESCRIPTION
WHAT DID WE DO?
1. OXFORD LEARNING
(Nick Whitehead, CEO)
Founder decision to sell equity in a private firm
DCF + valuation using multiples 2. CROCS
(Stacy Yeung, analyst)
Investor decision to buy, hold, or sell shares
DCF + valuation using multiples 3. ROSETTA STONE
(Tom Adams, CEO)
CEO decision on price to DCF + valuation using sell shares in IPO multiples 4. MERCURY ATHLETIC
(John Liedtke, Active Gear
Inc.)
Bidder price to acquire a division of a company
DCF + valuation using multiples 5. EMPIRE
(Greg & Scott, Scotia
Capital)
Bidder price to acquire a publicly-traded company
(Oshawa)
DCF of stand-alone firm + synergies, valuation using multiples, bidding strategy
+ financing
2. WACC – CHOOSING WEIGHTS
Since we are discount future FCFs, we want a forwardlooking WACC
Hence we want to use forward-looking capital structure:
1. Use the company target capital structure
– As stated by the management (case fact)
– As from comparable firms (if the case facts hint you so)
2. Use actual capital structure based on market weights
– It is ok to use the book value of interest-bearing financial debt – Avoid book value of equity (it’s a plug)
2. WACC – COST OF EQUITY (CAPM)
Risk-free rate:
– Use longest maturity riskless rate available
– 20/ 30 years T-bonds
Beta: measure of a firm’s
Course review
Ale Previtero
AGENDA
1. Overview of valuation cases
2. WACC
• Cost of equity, choosing beta, choosing weights, when to
use premium.
3. Valuation using Discounted Cash Flow (DCF)
• Key assumptions, Terminal Value, sensitivity
4. Valuation using multiples
• Key points, pros & cons, choosing comparable firms
• Which multiple? Which year? Example.
5. Financing an Acquisition
• Determine price. Financing. Making a decision.
6. Final exam
• How to review, how to approach the case
1. OVERVIEW OF VALUATION CASES
CASE (Protagonist)
DESCRIPTION
WHAT DID WE DO?
1. OXFORD LEARNING
(Nick Whitehead, CEO)
Founder decision to sell equity in a private firm
DCF + valuation using multiples 2. CROCS
(Stacy Yeung, analyst)
Investor decision to buy, hold, or sell shares
DCF + valuation using multiples 3. ROSETTA STONE
(Tom Adams, CEO)
CEO decision on price to DCF + valuation using sell shares in IPO multiples 4. MERCURY ATHLETIC
(John Liedtke, Active Gear
Inc.)
Bidder price to acquire a division of a company
DCF + valuation using multiples 5. EMPIRE
(Greg & Scott, Scotia
Capital)
Bidder price to acquire a publicly-traded company
(Oshawa)
DCF of stand-alone firm + synergies, valuation using multiples, bidding strategy
+ financing
2. WACC – CHOOSING WEIGHTS
Since we are discount future FCFs, we want a forwardlooking WACC
Hence we want to use forward-looking capital structure:
1. Use the company target capital structure
– As stated by the management (case fact)
– As from comparable firms (if the case facts hint you so)
2. Use actual capital structure based on market weights
– It is ok to use the book value of interest-bearing financial debt – Avoid book value of equity (it’s a plug)
2. WACC – COST OF EQUITY (CAPM)
Risk-free rate:
– Use longest maturity riskless rate available
– 20/ 30 years T-bonds
Beta: measure of a firm’s