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    Takeovers, Restructuring, and Corporate Governance By: J. Fred Weston Et Al., Pearson Prentice Hall, 2004, 2001

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    Nirnay Biswas
    The document discusses valuation techniques for companies using comparable company and transaction ratios as well as discounted cash flow analysis. It provides examples of applying valuation ratios to companies and transactions to estimate value. It also outlines the key components of a discounted cash flow model including projecting cash flows, determining the present value of cash flows, calculating the residual value, and accounting for debt and nonoperating assets to estimate shareholder value.

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    Takeovers, Restructuring, and Corporate Governance By: J. Fred Weston Et Al., Pearson Prentice Hall, 2004, 2001

    Uploaded by

    Nirnay Biswas
    28 views11 pages
    The document discusses valuation techniques for companies using comparable company and transaction ratios as well as discounted cash flow analysis. It provides examples of applying valuation ratios to companies and transactions to estimate value. It also outlines the key components of a discounted cash flow model including projecting cash flows, determining the present value of cash flows, calculating the residual value, and accounting for debt and nonoperating assets to estimate shareholder value.

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    The document discusses valuation techniques for companies using comparable company and transaction ratios as well as discounted cash flow analysis. It provides examples of applying valuation ratios to companies and transactions to estimate value. It also outlines the key components of a discounted cash flow model including projecting cash flows, determining the present value of cash flows, calculating the residual value, and accounting for debt and nonoperating assets to estimate shareholder value.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    28 views11 pages

    Takeovers, Restructuring, and Corporate Governance By: J. Fred Weston Et Al., Pearson Prentice Hall, 2004, 2001

    Uploaded by

    Nirnay Biswas
    The document discusses valuation techniques for companies using comparable company and transaction ratios as well as discounted cash flow analysis. It provides examples of applying valuation ratios to companies and transactions to estimate value. It also outlines the key components of a discounted cash flow model including projecting cash flows, determining the present value of cash flows, calculating the residual value, and accounting for debt and nonoperating assets to estimate shareholder value.

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    © All Rights Reserved
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    Source: Takeovers, Restructuring, and Corporate Governance by

    J. Fred Weston Et Al., Pearson Prentice Hall, 2004, 2001

    Comparable Companies Ratios 9.1a


    Application of Valuation Ratios to Company W

    Actual Recent Data Indicated Value


    for Company W Average Market Ratio of Equity (in millions)

    Sales = $100 1.0 $100


    Book value of equity = 60 1.5 90
    Net Income = 5 20 100
    Average = $ 97

    Source: Takeovers, Restructuring, and Corporate Governance by


    J. Fred Weston Et Al., Pearson Prentice Hall, 2004, 2001

    Comparable Transaction Ratios 9.1b


    1.2

    Source: Takeovers, Restructuring, and Corporate Governance by


    J. Fred Weston Et Al., Pearson Prentice Hall, 2004, 2001

    Comparable Transaction Ratios 9.2a


    Source: Takeovers, Restructuring, and Corporate Governance by
    J. Fred Weston Et Al., Pearson Prentice Hall, 2004, 2001

    Comparable Transaction Ratios 9.2b


    Source: Takeovers, Restructuring, and Corporate Governance by
    J. Fred Weston Et Al., Pearson Prentice Hall, 2004, 2001

    Data for Comparable Transactions 9.3a


    Comparable Transaction Ratios

    Amoco Texaco Conoco Average


    Total paid/sales 1.38 0.77 0.37 0.84

    Total paid/book 3.00 2.79 2.29 2.69

    Total paid/net income 22.46 15.46 7.60 15.18


    Premium paid, % target 22.3% 17.7% 0.0% 13.3%

    Premium paid, % combined 7.7% 6.3% 0.00% 4.7%

    Source: Takeovers, Restructuring, and Corporate Governance by


    J. Fred Weston Et Al., Pearson Prentice Hall, 2004, 2001

    Comparable Transaction Ratios 9.3b


    Source: Takeovers, Restructuring, and Corporate Governance by
    J. Fred Weston Et Al., Pearson Prentice Hall, 2004, 2001

    Application of Valuation Ratios to Mobil 9.3c


    Source: Takeovers, Restructuring, and Corporate Governance by
    J. Fred Weston Et Al., Pearson Prentice Hall, 2004, 2001

    Application of Valuation Ratios to Mobil 9.4


    Summary Valuation Analysis

    Source: Takeovers, Restructuring, and Corporate Governance by


    J. Fred Weston Et Al., Pearson Prentice Hall, 2004, 2001
    The discounted cash flow technique
    Historical Adjustments for Prospects
    Financial Nonrecurring For the
    Results Items Future

    Cash Projected Sales


    Flow And Operation Profit
    Adjustments

    Year 1 Year 2 Year 3 Year 4


    Cash Flow Cash Flow Cash Flow And Beyond
    From Operations From Operations From Cash Flow
    Operations From
    Present Value 1 Years
    2 Years Operations
    Cash Flow 3 Years
    From Operations
    +
    Present Value
    Of Residual 4 Years +
    Value
    +
    Marketable
    Securities and
    Excess Assets
    -

    Market Shareholder
    Value Of Debt
    -
    Value

    *The discounted cash flow value (or what the total capital employed in the business is worth)
    Has been calculated based on operating profits that do not consider financing costs (for
    Example, interest expense) or income from nonoperating assets. As a result, the net value
    Of the equity is derived by subtracting the market value of debt and adding the market value
    Of nonoperating assets.
    TABLE 10.6 General DCF Spreadsheet Valuation Model (Model 10-03B) (dollar amounts in millions except per share)

    Source: WESTON ET, AL

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