Cash_Flow_Definitions.doc - NOTES FROM CORPORATE FINANCE...

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NOTES FROM CORPORATE FINANCE REVIEW SESSION APV Valuation (Use if same amount of interest each year) (1) Calculate unlevered cash flow (UCF) Unlevered Cash Flow Revenues -- Expenses EBIT -- Taxes Unlevered Net Income + Depreciation -- CapEx -- Change in NWC Unlevered Free Cash Flow (2) Discount at unlevered cost of equity CAPM: r(E unlevered) = Risk-free + Asset Beta (unlevered) * (Risk premium) (3) Add value of tax shields (Tc*B) (4) Gives value of firm WACC Valuation (Use if capital structure will stay the same going forward) (1) Calculate unlevered cash flow (2) Discount UCF at WACC Cost of debt = Interest rate Cost of equity (use CAPM) = Risk-free + Equity Beta * (Risk Premium) (3) Find firm value (4) Equity Value = Firm Value – Debt
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CorpFin Review page 2/2 Flow to Equityholders (FTE) (1) Calculate levered cash flows Levered Cash Flow Revenue -- Expenses EBIT -- Interest EBT -- Taxes
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  • Spring '15
  • Han Ozsoylev
  • Valuation, Generally Accepted Accounting Principles,  Asset Beta

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