Firm Value
The sum of the present values of future free cash flows plus the present value of the terminal value.
FCFt
Free Cash Flow in year t
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Flashcards for firm valuation, economic value added, market value added, enterprise value, comparables valuation, cost of capital, free cash flow to equity and return metrics.
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Firm Value
The sum of the present values of future free cash flows plus the present value of the terminal value.
FCFt
Free Cash Flow in year t
r
Discount rate (typically WACC)
g
Growth rate
Terminal Value
Value of firm after year N
Economic Value Added (EVA)
NOPAT - (WACC * Capital)
NOPAT
EBIT * (1 – tax rate)
Capital
Total capital employed (debt + equity)
EVA (Alternate Form)
Capital * (ROIC - WACC)
Market Value Added (MVA)
Market Value of Capital - Book Value of Capital
Enterprise Value (EV)
Equity Value + Net Debt
Enterprise Value (EV) Calculation
Share Price * Shares Outstanding + Debt - Cash
EV/EBITDA
Used for capital-intensive firms
P/E
Equity-focused measure (price per share / earnings per share)
P/S
Used when earnings are negative or volatile
EV/Sales
Useful for startups or firms with no profit yet
Cost of Preferred Stock
Dividend / Price
Free Cash Flow to Equity (FCFE)
Net Income + Depreciation - Capex - ΔWC - Debt Repayment + New Debt Issued
ROIC
NOPAT / Capital Invested
ROE
Net Income / Equity
ROA
Net Income / Total Assets