COMPANY VALUATION

 A procedure to determine Company’s economic value for whole business or

company unit.
 Company valuation uses in finding the fair value of a business in many reasons,
buy/ Sell agreement, establishing partner ownership, analysis of the company’s
management, planning merging & acquisition.
 Company valuation is typically conducts when the owner wants to sell all or a
portion of its operating units or looking to merge or acquire another company.

METHODS OF COMPANY VALUATION

When valuing a company as a going concern, there are three main valuation
methods used. These are the most common methods of valuation used in
investment banking, equity research, private equity, corporate development,
mergers & acquisitions.

 COST APPROACH
 The Cost Approach looks at what it costs to rebuild or replace an asset.
 The cost approach method is useful in valuing real estate, such as commercial
property, new construction, or special use properties.
 The cost approach considers the cost of land, plus costs of construction, less
depreciation.

 MARKET APPROACH
 The market approach is a method for determining the value of an asset.
 The market approach excels in situations where abundant data is available on
comparable transactions. When that data is not available, alternative approaches
may be required.
 It includes Comparable Analysis and Precedent Transactions.

 DISCOUNTED CASH FLOW (DCF) APPROACH

 The discounted cash flow (DCF) approach is a form of intrinsic valuation.
 Discounted cash flow (DCF) is a valuation method used to estimate the value of
an investment based on its expected future cash flows. DCF analysis attempts to
figure out the value of an investment today, based on projections of how much
money it will generate in the future.
 Companies typically use the weighted average cost of capital for the discount
rate, because it takes into consideration the rate of return expected by
shareholders.
 The DCF has limitations, primarily in that it relies on estimations of future cash
flows, which could prove inaccurate.