NN - 2 Calculating the Change in Net Current Asset Value 2011-10-14.doc

NN - 2 Calculating the Change in Net Current Asset Value 2011-10-14.doc

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NN – 2 Calculating the Change in Net Current Asset Value For your Net-Net presentation Fall 2011 Purpose The purpose of this document is to document how you calculate the change in Net Current Asset Value (NCAV) for your Net-net presentation. The change in NCAV helps you understand what is happening to the value of the firm over time. If the change in NCAV is negative, the company is burning assets or is decreasing the NCAV for the company. If it is growing or increasing, then the company is increasing in NCAV meaning the value of the company is increasing. From this number we can determine the growth or decline in NCAV Calculation Start with EBIT from your Income Statement (Operating Income) Add back Depreciation/Amortizationfrom Cash Flow from Operations Subtract Capital Expenditures from Cash Flows from Investing Subtract Cash Taxes. Cash taxes is calculated as your Provision for taxes from the Income Statement, and less Deferred Taxes from the Cash Flow from Operations.
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Unformatted text preview: If deferred taxes is negative in your Cash Flow Statement, then you would add it back instead of subtract it out. Add Stock based compensation from Cash Flow from Operations. Please note that this is a non-cash transaction, similar to depreciation, which is added back to give you your NCAV value. Your model should look like: 2006 2007 2008 2009 2010 11Q1 11Q2 11Q3 EBIT (operating income) + D & A- Capital Expenditures- Cash Taxes + Stock based compensation Change in Net Current Asset Value Note that you do not have to forecast any earnings or do anything like that. We only want to see what you are doing as to the historical NCAV This is your percentages or haircut of NCA less Total Liabilities times what you think you could receive in your specific scenarios CAV This is your Current Asset Value without the percentages or haircut Graham NCAV This is your Net Current Assets less Total Liabilities times Grahams recommended 66% to follow his framework...
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NN - 2 Calculating the Change in Net Current Asset Value 2011-10-14.doc

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