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Media type:
E-Book
Title:
Beyond the Planning Period - Tips on Crafting a Terminal Valuation (TV) Part I
:
The Impracticality of Forecasting to an Infinite Time Horizon Using the FCF Valuation Approach Makes the Construction of a TV Inevitable
Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments December 18, 2011 erstellt
Description:
Part I deals with some of the major theoretical issues and how they might be solved by the practitioner. Of concern to the analyst is the appropriate reinvestment rate if one assumes real growth; we maintain that real g/roic is the correct fraction of nominal NOPLAT to reinvest, as using nominal G/ROIC penalizes the firm simply where the FCF grows through inflation. Also, we question the way analysts currently define Invested Capital and in many instances believe so called 'excess cash' (which is often subtracted) may not be excess cash at all and should be included in the calculation of Invested Capital. In turn, this affects calculated ROIC.The impracticality of forecasting to an infinite time horizon using the FCF valuation approach however, makes the construction of a TV inevitable