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Learning to Invest / Valuation Strategies
|Subject: Re: Discounted Cash Flow Model - Negative FCF||Date: 2/8/2011 6:57 PM|
|Author: jackcrow||Number: 1640 of 1674|
You work harder than I do.
IC = Total Assets - C&E - short term investments - long term investments - other NICBL (Non Income Bearing Current Liabilities)
-if I'm feeling frogy or the company really looks like it needs it I'll make an adjustment for goodwill
-if they are a R&D heavy company I make adjustments for that.
-if they are really cash and investment heavy I'll run them with and without long and maybe even short term investments <-- think MSFT
For NOPLAT I substitute NOPAT = EBIT*(1-tax rate).
When I get down to customizing its more about tweaking IC than NOPAT although I am likely to run a rolling trailing twelve on NOPAT and dig through their "one time expense" history.
Something along these lines is where I start
The way I look at it is that A)this is a whole firm approach so both top and bottom of the line need to reflect that reality. B)Invested Capital is the capital at work in the business/industry they are in. C)Too many adjustments to earnings and one can get lost and confused.
IC = capital invested to make the thing work (capitalized leases can fit under NIBCL if one so chooses)
NOPAT = EBIT scrutinized for goofiness *(1-tax rate or estimated/average tax rate)if EBIT has some goofyness it can be rolling block smoothed too goofy and it gets roundfiled. I have better things to do
EVA = (ROIC - WACC)*IC
MVA = sum of the future value of EVA + cash - debt (as a whole firm number it needs to be adjusted for equity value)
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