fm3_chapter05 - NONFINANCIAL FIRM: USING THE BALANCE SHEET...

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ORIGINAL BALANCE SHEET Assets Liabilities Cash and marketable securities Operating current liabilities Operating current assets Debt Net fixed assets Equity Goodwill Total assets Total liabilities and equity THE ENTERPRISE VALUATION BALANCE SHEET Assets Liabilities Cash and marketable securities Operating current assets Debt - Operating current liabilities = Net working capital Net fixed assets Equity Goodwill Market value Market value THE ENTERPRISE VALUATION "BALANCE SHEET" A slight variation (cash netted out from debt) Assets Liabilities Operating current assets Debt - cash & Mkt. securities - Operating current liabilities = Net debt = Net working capital Net fixed assets Equity Goodwill Enterprise Value Enterprise Value Note that both variations on the enterprise valuation "balance sheet" give the same equity value. Assets Liabilities Operating current assets Debt - cash/marketable securities - Operating current liabilities = Net working capital Net fixed assets Equity Goodwill Enterprise value Enterprise value NONFINANCIAL FIRM: USING THE BALANCE SHEET AS AN ENTERPRISE VALUATION MODEL NONFINANCIAL FIRM: ENTERPRISE VALUATION MODEL Cash netted out from debt =PV(FCFs discounte at WACC) Enterprise value = PV (FCFs discounted at WACC) Enterprise value = PV (FCFs discounted at WACC)
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Note that both variations on the enterprise valuation "balance sheet" give the same equity value.
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ASSETS 1997 1996 Cash and due from banks 30,487 28,339 Federal funds sold 35,760 20,350 Investment securities Securities Available-for-Sale, at fair value 60,476 58,576 45,151 58,437 Total investment securities 141,387 137,363 Loans, Net of Unearned Discount 276,069 220,006 Allowance for Loan Losses -4,065 -2,972 Loans, Net 272,004 217,034 Premises and equipment, net of depreciation 7,916 7,105 Accrued income receivable 3,442 3,189 Other real estate 151 166 Other assets 4,407 2,052 TOTAL ASSETS 459,794 395,248 LIABILITIES AND SHAREHOLDERS' EQUITY 1997 1996 Noninterest-bearing demand deposits 126,398 103,695 Interest-bearing deposits 275,326 241,328 Total deposits 401,724 345,023 Securities sold under agreement to repurchase 14,689 13,209 Accrued interest payable 678 638 Other liabilities 1,591 1,298 TOTAL LIABILITIES 418,682 360,168 Common Stock 8,127 4,041 Capital Surplus 6,251 6,136 Retained Earnings 26,491 24,675 243 228 Total shareholders equity 41,112 35,080 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 459,794 395,248 Years ended Decembe ---------- ------------ ------------ 1997 1996 1995 ---------- ---------- ---------- Summary of Earnings: SUMMIT BANK 1996 and 1997, (thousand $) Securities Held-to-Maturity, at cost (fair value of $45,360,000 and $58,629,000 at December 31, 1997 and 1996, respectively) Unrealized Gain on Investment Securities Available-for-Sale, Net of Tax
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Interest Income $31,972 $27,577 $22,929 Interest Expense 11,301 9,771 8,277 -------- -------- -------- Net Interest Income 20,671 17,806 14,652 Provision (Credit) for Loan Losses -900 -819 -236 Securities Gains (Losses)
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This note was uploaded on 01/23/2011 for the course FGB 780 taught by Professor Edwardchang during the Spring '09 term at Missouri State University-Springfield.

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fm3_chapter05 - NONFINANCIAL FIRM: USING THE BALANCE SHEET...

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