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  • Laws 15

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    Ehab M. Abdel Hady
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    1) The document contains selected equations and data from appendices C of chapters 14 and 15. It includes equations for calculating additional funds needed, actual and target fixed assets, and the value of operations using the discounted cash flow method. 2) Key valuation metrics are defined, including value of operations (VOP), operating profitability (OP), capital requirements (CR), and expected return on invested capital (EROIC). 3) Formulas are provided for calculating the horizon value using the growth rate (g) and weighted average cost of capital (WACC).

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    1) The document contains selected equations and data from appendices C of chapters 14 and 15. It includes equations for calculating additional funds needed, actual and target fixed assets, and the value of operations using the discounted cash flow method. 2) Key valuation metrics are defined, including value of operations (VOP), operating profitability (OP), capital requirements (CR), and expected return on invested capital (EROIC). 3) Formulas are provided for calculating the horizon value using the growth rate (g) and weighted average cost of capital (WACC).

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    6 views1 page

    Laws 15

    Uploaded by

    Ehab M. Abdel Hady
    1) The document contains selected equations and data from appendices C of chapters 14 and 15. It includes equations for calculating additional funds needed, actual and target fixed assets, and the value of operations using the discounted cash flow method. 2) Key valuation metrics are defined, including value of operations (VOP), operating profitability (OP), capital requirements (CR), and expected return on invested capital (EROIC). 3) Formulas are provided for calculating the horizon value using the growth rate (g) and weighted average cost of capital (WACC).

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    of 1

    1020 Appendix C Selected Equations and Data

    Chapter 14
    Additional Required Spontaneous Increase in
    funds 5 asset 2 liability 2 retained
    needed increase increase earnings

    AFN 5 1A*>S0 2 ¢S 2 1L*>S0 2 ¢S 2 MS1 1RR2 .

    Full
    Actual sales
    capacity 5 .
    sales Percentage of capacity
    at which fixed assets
    were operated

    Target fixed assets Actual fixed assets


    5 .
    Sales Full capacity sales

    Required level of fixed assets 5 1Target fixed assets>Sales2 1Projected sales2.

    Chapter 15
    Vop 5 Value of operations

    5 PV of expected future free cash flows


    q
    FCF1
    5 a t.
    t51 11 1 WACC2

    FCFN11 FCFN 11 1 g2
    Horizon value: Vop1at time N2 5 5 .
    WACC 2 g WACC 2 g

    Total value 5 Vop 1 Value of nonoperating assets.

    Value of equity 5 Total value 2 Preferred stock 2 Debt.

    Operating profitability (OP) 5 NOPAT/Sales.

    Capital requirements (CR) 5 Operating capital/Sales.

    EROICt 5 Expected return on invested capital


    5 NOPATt11>Capitalt
    5 NOPATt 11 1 g2>Capitalt.

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