VALUATION WORKBOOK (JULY 2016)people.stern.nyu.edu/.../execs/ValuationWorkbookJuly2016.pdfColombian...
Transcript of VALUATION WORKBOOK (JULY 2016)people.stern.nyu.edu/.../execs/ValuationWorkbookJuly2016.pdfColombian...
![Page 1: VALUATION WORKBOOK (JULY 2016)people.stern.nyu.edu/.../execs/ValuationWorkbookJuly2016.pdfColombian Peso 7.53% Baa2 South African Rand 8.75% Baa2 Croatian Kuna 3.68% Ba2 Taiwanese](https://reader034.fdocuments.us/reader034/viewer/2022042811/5fa31ba213335f388b653bd0/html5/thumbnails/1.jpg)
VALUATIONWORKBOOK(JULY2016)
MarketMoneyball!
1
![Page 2: VALUATION WORKBOOK (JULY 2016)people.stern.nyu.edu/.../execs/ValuationWorkbookJuly2016.pdfColombian Peso 7.53% Baa2 South African Rand 8.75% Baa2 Croatian Kuna 3.68% Ba2 Taiwanese](https://reader034.fdocuments.us/reader034/viewer/2022042811/5fa31ba213335f388b653bd0/html5/thumbnails/2.jpg)
2
Yourdata…
¨ DataPacket¤ Page1:HDS (Bloomberg) – Top17stockholders¤ Page2:Beta(Bloomberg) – 2yearweeklyreturnbeta¤ Pages3-7:DES(Bloomberg) – 5pagedescription ofyourcompany (Forsomeof
you, itmaybeonly4pages)¤ Page8:CRPR– BondRatingorBloomberg DefaultRiskAssessment¤ Page9:DDIS:Debtduetable(withmaturities)¤ Page10:FA(Multi-yearfinancial summary)
¨ Checklistbeforeyoustart¤ Whatcountry isyourcompany incorporated in?¤ Whatcurrencyarethefinancialstatementsin?(Notnecessarilyinthelocal
currency)¤ Whatcurrency isyourmarketcapitalizationandstockpricestatedin?(Maynot
matchthecurrencyofthefinancialstatements)¤ Whatwasthemostrecentfiscalyear?(Formostofyourcompanies, itwillbea
yearending December…butsomemayhaveotheryearends)
2
![Page 3: VALUATION WORKBOOK (JULY 2016)people.stern.nyu.edu/.../execs/ValuationWorkbookJuly2016.pdfColombian Peso 7.53% Baa2 South African Rand 8.75% Baa2 Croatian Kuna 3.68% Ba2 Taiwanese](https://reader034.fdocuments.us/reader034/viewer/2022042811/5fa31ba213335f388b653bd0/html5/thumbnails/3.jpg)
Itstartsatthetop
CorporateGovernance3
![Page 4: VALUATION WORKBOOK (JULY 2016)people.stern.nyu.edu/.../execs/ValuationWorkbookJuly2016.pdfColombian Peso 7.53% Baa2 South African Rand 8.75% Baa2 Croatian Kuna 3.68% Ba2 Taiwanese](https://reader034.fdocuments.us/reader034/viewer/2022042811/5fa31ba213335f388b653bd0/html5/thumbnails/4.jpg)
Percent of outstanding shares in company
Source for data: Will vary across markets. 13F is SEC filing for US mutual/pension funds
4
![Page 5: VALUATION WORKBOOK (JULY 2016)people.stern.nyu.edu/.../execs/ValuationWorkbookJuly2016.pdfColombian Peso 7.53% Baa2 South African Rand 8.75% Baa2 Croatian Kuna 3.68% Ba2 Taiwanese](https://reader034.fdocuments.us/reader034/viewer/2022042811/5fa31ba213335f388b653bd0/html5/thumbnails/5.jpg)
5
CorporateGovernance:Assessingwherethepowerliesandpotentialconflictsofinterest
5
![Page 6: VALUATION WORKBOOK (JULY 2016)people.stern.nyu.edu/.../execs/ValuationWorkbookJuly2016.pdfColombian Peso 7.53% Baa2 South African Rand 8.75% Baa2 Croatian Kuna 3.68% Ba2 Taiwanese](https://reader034.fdocuments.us/reader034/viewer/2022042811/5fa31ba213335f388b653bd0/html5/thumbnails/6.jpg)
TheMacroPieces:Riskfree Rates&RiskPremiums
DiscountRatesI6
![Page 7: VALUATION WORKBOOK (JULY 2016)people.stern.nyu.edu/.../execs/ValuationWorkbookJuly2016.pdfColombian Peso 7.53% Baa2 South African Rand 8.75% Baa2 Croatian Kuna 3.68% Ba2 Taiwanese](https://reader034.fdocuments.us/reader034/viewer/2022042811/5fa31ba213335f388b653bd0/html5/thumbnails/7.jpg)
7
Riskfreerate:MajorCurrencyGovernmentBonds
7
![Page 8: VALUATION WORKBOOK (JULY 2016)people.stern.nyu.edu/.../execs/ValuationWorkbookJuly2016.pdfColombian Peso 7.53% Baa2 South African Rand 8.75% Baa2 Croatian Kuna 3.68% Ba2 Taiwanese](https://reader034.fdocuments.us/reader034/viewer/2022042811/5fa31ba213335f388b653bd0/html5/thumbnails/8.jpg)
8
LocalCurrencyGovernmentBondRates– July1,2016
Aswath Damodaran8
TheAaaClub TheRestoftheWorld(Contd)Australian$ 1.95% Aaa IsraeliShekel 1.63% A1Canadian$ 1.06% Aaa JapaneseYen -0.25% A1DanishKrone 0.10% Aaa KenyanShilling 14.56% B1Euro -0.11% Aaa KoreanWon 1.46% Aa2NorwegianKrone 1.02% Aaa LatvianLat 0.55% A3NZ$ 2.33% Aaa LithuanianLitas 0.85% A3Singapore$ 1.91% Aaa MalyasianRinggit 3.74% A3SwedishKrona 0.30% Aaa MexicanPeso 5.85% A3SwissFranc -0.58% Aaa NigerianNaira 14.42% B1US$ 1.47% Aaa PakistaniRupee 8.03% B3
TheRestoftheWorld PeruvianSol 6.00% A3BrazilianReai 12.06% Ba2 PhillipinePeso 4.35% Baa2BritishPound 0.88% Aa1 PolishZloty 2.93% A2BulgarianLev 2.50% Baa2 QuatariRial 3.24% Aa2ChileanPeso 4.48% Aa3 RomanianLeu 3.50% Baa3ChineseYuan 2.88% Aa3 RussianRuble 8.43% Ba1ColombianPeso 7.53% Baa2 SouthAfricanRand 8.75% Baa2CroatianKuna 3.68% Ba2 Taiwanese$ 0.76% Aa3CzechKoruna 0.46% A1 ThaiBaht 1.94% Baa1HK$ 1.00% Aa1 TurkishLira 9.09% Baa3HungarianForint 3.23% Ba1 VenezuelanBolivar 11.54% Caa3IcelandKrona 6.24% Baa2 VietnameseDong 6.90% B1IndianRupee 7.42% Baa3IndonesianRupiah 7.51% Baa3
![Page 9: VALUATION WORKBOOK (JULY 2016)people.stern.nyu.edu/.../execs/ValuationWorkbookJuly2016.pdfColombian Peso 7.53% Baa2 South African Rand 8.75% Baa2 Croatian Kuna 3.68% Ba2 Taiwanese](https://reader034.fdocuments.us/reader034/viewer/2022042811/5fa31ba213335f388b653bd0/html5/thumbnails/9.jpg)
9
Approach1:DefaultspreadfromGovernmentBonds
Country $10-yearBondRate UST.Bond Rate DefaultSpreadPhilippines 2.31% 1.47% 0.84%Chile 2.45% 1.47% 0.98%Peru 2.68% 1.47% 1.21%Mexico 2.97% 1.47% 1.50%Colombia 3.40% 1.47% 1.93%Indonesia 3.55% 1.47% 2.08%Turkey 3.95% 1.47% 2.48%Brazil 4.82% 1.47% 3.35%Ukraine 8.32% 1.47% 6.85%Venezuela 26.79% 1.47% 25.32%
![Page 10: VALUATION WORKBOOK (JULY 2016)people.stern.nyu.edu/.../execs/ValuationWorkbookJuly2016.pdfColombian Peso 7.53% Baa2 South African Rand 8.75% Baa2 Croatian Kuna 3.68% Ba2 Taiwanese](https://reader034.fdocuments.us/reader034/viewer/2022042811/5fa31ba213335f388b653bd0/html5/thumbnails/10.jpg)
10
Approach2:CDSSpreads– July1,2016
Aswath Damodaran10
Name CDS CDSnetUS Name CDS CDSnetUS Name CDS CDSnetUSAbuDhabi 1.29% 0.85% HongKong 0.73% 0.29% Philippines 1.65% 1.20%Argentina 4.95% 4.51% Hungary 2.03% 1.59% Poland 1.44% 1.00%Australia 0.65% 0.21% Iceland 1.33% 0.89% Portugal 3.91% 3.47%Austria 0.63% 0.19% India 2.34% 1.90% Qatar 1.61% 1.17%Bahrain 4.37% 3.92% Indonesia 2.52% 2.08% Romania 1.67% 1.23%Belgium 0.89% 0.45% Ireland 1.23% 0.79% Russia 2.92% 2.48%Brazil 3.94% 3.50% Israel 1.23% 0.79% SaudiArabia 2.06% 1.62%Bulgaria 2.06% 1.62% Italy 2.14% 1.70% Slovakia 0.95% 0.51%Chile 1.37% 0.93% Japan 0.76% 0.32% Slovenia 1.52% 1.08%China 1.66% 1.21% Kazakhstan 2.79% 2.35% SouthAfrica 3.40% 2.95%Colombia 2.77% 2.33% Latvia 1.19% 0.75% SouthKorea 0.79% 0.35%CostaRica 4.26% 3.82% Lebanon 5.26% 4.82% Spain 1.62% 1.18%Croatia 2.88% 2.44% Lithuania 1.09% 0.65% Sweden 0.46% 0.02%Cyprus 3.31% 2.87% Malaysia 2.09% 1.65% Switzerland 0.62% 0.18%Czech 0.88% 0.44% Mexico 2.32% 1.88% Thailand 1.68% 1.24%Denmark 0.47% 0.03% Morocco 2.32% 1.88% Tunisia 5.77% 5.33%Dubai 2.33% 1.88% Netherlands 0.53% 0.09% Turkey 3.01% 2.57%Egypt 5.39% 4.95% NewZealand 0.73% 0.29% Ukraine NA NAEstonia 0.86% 0.42% Nigeria NA NA UnitedKingdom 0.85% 0.41%Finland 0.52% 0.08% Norway 0.43% 0.00% UnitedStates 0.44% 0.00%France 0.78% 0.34% Pakistan NA NA Venezuela 32.59% 32.15%Germany 0.48% 0.04% Panama 2.19% 1.75% Vietnam 2.99% 2.55%Greece NA NA Peru 2.03% 1.59%
![Page 11: VALUATION WORKBOOK (JULY 2016)people.stern.nyu.edu/.../execs/ValuationWorkbookJuly2016.pdfColombian Peso 7.53% Baa2 South African Rand 8.75% Baa2 Croatian Kuna 3.68% Ba2 Taiwanese](https://reader034.fdocuments.us/reader034/viewer/2022042811/5fa31ba213335f388b653bd0/html5/thumbnails/11.jpg)
11
Approach3:TypicalDefaultSpreads:July1,2016
Aswath Damodaran11
SovereignRating DefaultSpread(inbasispoints)Aaa 0Aa1 45Aa2 56Aa3 68A1 79A2 95A3 135Baa1 179Baa2 213Baa3 247Ba1 280Ba2 337Ba3 404B1 505B2 617B3 729Caa1 841Caa2 1010Caa3 1121Ca 1345
![Page 12: VALUATION WORKBOOK (JULY 2016)people.stern.nyu.edu/.../execs/ValuationWorkbookJuly2016.pdfColombian Peso 7.53% Baa2 South African Rand 8.75% Baa2 Croatian Kuna 3.68% Ba2 Taiwanese](https://reader034.fdocuments.us/reader034/viewer/2022042811/5fa31ba213335f388b653bd0/html5/thumbnails/12.jpg)
12
Gettingtoariskfreerateinacurrency:Example
¨ TheBraziliangovernmentbondrateinnominalreais onJuly1,2016was12.06%.Togettoariskfree rateinnominalreais,wecanuseoneofthreeapproaches.¨ Approach1:Government Bondspread
¤ The10-yearBrazilbond,denominated inUSdollars,hasaspreadof3.35%overtheUStreasurybondrate.
¤ Riskfree ratein$R=12.06%- 3.35%=8.71%¨ Approach2:TheCDSSpread
¤ TheCDSspread forBrazil,adjusted fortheUSCDSspread was3.50%.
¤ Riskfree ratein$R=12.06%- 3.50%=8.56%¨ Approach3:TheRatingbasedspread
¤ BrazilhasaBa2localcurrencyratingfromMoody’s.Thedefaultspread forthatratingis3.37%
¤ Riskfree ratein$R=12.06%- 3.37%=8.69%
Aswath Damodaran12
![Page 13: VALUATION WORKBOOK (JULY 2016)people.stern.nyu.edu/.../execs/ValuationWorkbookJuly2016.pdfColombian Peso 7.53% Baa2 South African Rand 8.75% Baa2 Croatian Kuna 3.68% Ba2 Taiwanese](https://reader034.fdocuments.us/reader034/viewer/2022042811/5fa31ba213335f388b653bd0/html5/thumbnails/13.jpg)
13
RiskfreeRates:ByCurrency– July1,201613
CurrencyGovtRate Rating-basedSpread RiskfreeRate
CurrencyGovtRate
Rating-basedSpread
RiskfreeRate
Australian$ 1.95% 0.00% 1.95% MalyasianRinggit 3.74% 1.35% 2.39%BrazilianReai 12.06% 3.37% 8.69% MexicanPeso 5.85% 1.35% 4.50%BritishPound 0.88% 0.45% 0.43% NigerianNaira 14.42% 5.05% 9.37%BulgarianLev 2.50% 2.13% 0.37% NorwegianKrone 1.02% 0.00% 1.02%Canadian$ 1.06% 0.00% 1.06% NZ$ 2.33% 0.00% 2.33%ChileanPeso 4.48% 0.68% 3.80% PakistaniRupee 8.03% 7.29% 0.74%ChineseYuan 2.88% 0.68% 2.20% PeruvianSol 6.00% 1.35% 4.65%ColombianPeso 7.53% 2.13% 5.40% PhillipinePeso 4.35% 2.13% 2.22%CroatianKuna 3.68% 3.37% 0.31% PolishZloty 2.93% 0.95% 1.98%CzechKoruna 0.46% 0.79% -0.33% QuatariRial 3.24% 0.56% 2.68%DanishKrone 0.10% 0.00% 0.10% RomanianLeu 3.50% 2.47% 1.03%Euro -0.11% 0.00% -0.11% RussianRuble 8.43% 2.80% 5.63%HK$ 1.00% 0.45% 0.55% Singapore$ 1.91% 0.00% 1.91%HungarianForint 3.23% 2.80% 0.43% SouthAfricanRand 8.75% 2.13% 6.62%IcelandKrona 6.24% 2.13% 4.11% SwedishKrona 0.30% 0.00% 0.30%IndianRupee 7.42% 2.47% 4.95% SwissFranc -0.58% 0.00% -0.58%IndonesianRupiah 7.51% 2.47% 5.04% Taiwanese$ 0.76% 0.68% 0.08%IsraeliShekel 1.63% 0.79% 0.84% ThaiBaht 1.94% 1.79% 0.15%JapaneseYen -0.25% 0.79% -1.04% TurkishLira 9.09% 2.47% 6.62%KenyanShilling 14.56% 5.05% 9.51% US$ 1.47% 0.45% 1.02%KoreanWon 1.46% 0.56% 0.90% VenezuelanBolivar 11.54% 11.21% 0.33%LatvianLat 0.55% 1.35% -0.80% Vietnamese Dong 6.90% 5.05% 1.85%LithuanianLitas 0.85% 1.35% -0.50%
![Page 14: VALUATION WORKBOOK (JULY 2016)people.stern.nyu.edu/.../execs/ValuationWorkbookJuly2016.pdfColombian Peso 7.53% Baa2 South African Rand 8.75% Baa2 Croatian Kuna 3.68% Ba2 Taiwanese](https://reader034.fdocuments.us/reader034/viewer/2022042811/5fa31ba213335f388b653bd0/html5/thumbnails/14.jpg)
14
RiskfreeRate:DesperationTime?
¨ Itisentirelypossible thatyoumaybeunable tofindagovernmentbondissued inthe localcurrency(thatistraded)orthatyoudonottrustthegovernmentbondrateasafairmarketinterest rate.Therearetwowaysyoucangettoariskfreerate,inthiscase.
1. Buildupapproach:Theriskfreerateinanycurrencycanbewrittenasthesumoftwovariables:
Riskfreerate=ExpectedInflationincurrency+ExpectedrealinterestrateTheexpectedrealinterestratecanbecomputedinoneoftwoways:fromtheUSTIPsrateorsetequaltorealgrowthintheeconomy.Thus, iftheexpectedinflationrateinacountry isexpectedtobe15%andtheTIPsrateis1%,theriskfreerateis16%.
2. US$rate&Differential Inflation:Alternatively,youcanscaleuptheUS$riskfreeratebythedifferential inflationbetween theUS$andthecurrencyinquestion:
RiskfreerateCurrency=
Thus, iftheUS$riskfreerateis2.27%,theinflationrateintheforeigncurrencyis15%andtheinflationrateinUS$is1.5%,theforeigncurrencyriskfreerateisasfollows:Riskfreerate= 1.0227 !.!"
!.!"# − 1=15.87%
14
![Page 15: VALUATION WORKBOOK (JULY 2016)people.stern.nyu.edu/.../execs/ValuationWorkbookJuly2016.pdfColombian Peso 7.53% Baa2 South African Rand 8.75% Baa2 Croatian Kuna 3.68% Ba2 Taiwanese](https://reader034.fdocuments.us/reader034/viewer/2022042811/5fa31ba213335f388b653bd0/html5/thumbnails/15.jpg)
Black #: Total ERPRed #: Country risk premiumAVG: GDP weighted average
ERP
: Jul
y 20
16
![Page 16: VALUATION WORKBOOK (JULY 2016)people.stern.nyu.edu/.../execs/ValuationWorkbookJuly2016.pdfColombian Peso 7.53% Baa2 South African Rand 8.75% Baa2 Croatian Kuna 3.68% Ba2 Taiwanese](https://reader034.fdocuments.us/reader034/viewer/2022042811/5fa31ba213335f388b653bd0/html5/thumbnails/16.jpg)
TheMicroPieces:RelativeRiskMeasures,DefaultRiskandWeights
DiscountRatesII16
![Page 17: VALUATION WORKBOOK (JULY 2016)people.stern.nyu.edu/.../execs/ValuationWorkbookJuly2016.pdfColombian Peso 7.53% Baa2 South African Rand 8.75% Baa2 Croatian Kuna 3.68% Ba2 Taiwanese](https://reader034.fdocuments.us/reader034/viewer/2022042811/5fa31ba213335f388b653bd0/html5/thumbnails/17.jpg)
Regressionbetais0.422
Interceptin%0.057%
Adj Beta=(2/3)(0.422)+(1/3)(1)=0.614
Rsquared(decimals)=21.5%
Std errorofbeta=0.0867%confidence:0.34(=0.42-0.08)to0.50(=0.42+0.08)95%confidence:0.26(=0.42-2*0.08)to0.58(=0.42+2*0.08)
Ifannualizedriskfree rateduringperiodwas1.5%,Jensen’salpha=0.057%- (1.5%/52)*(1-0.422)=0.0403%
Usinga6%ERPformaturemarketsandacurrentriskfree rateof1.87%,ExpectedReturn=Riskfree rate+RawBeta(ERP)
=1.87%+0.422(6%)=4.40%17
Basedonweeklyreturns
![Page 18: VALUATION WORKBOOK (JULY 2016)people.stern.nyu.edu/.../execs/ValuationWorkbookJuly2016.pdfColombian Peso 7.53% Baa2 South African Rand 8.75% Baa2 Croatian Kuna 3.68% Ba2 Taiwanese](https://reader034.fdocuments.us/reader034/viewer/2022042811/5fa31ba213335f388b653bd0/html5/thumbnails/18.jpg)
18
ThebestR-squaredever?18
![Page 19: VALUATION WORKBOOK (JULY 2016)people.stern.nyu.edu/.../execs/ValuationWorkbookJuly2016.pdfColombian Peso 7.53% Baa2 South African Rand 8.75% Baa2 Croatian Kuna 3.68% Ba2 Taiwanese](https://reader034.fdocuments.us/reader034/viewer/2022042811/5fa31ba213335f388b653bd0/html5/thumbnails/19.jpg)
19
Whatsectorisyourfirmin?Bloombergsectorcategory
Readthedescriptionandmakeyourownjudgment
19
![Page 20: VALUATION WORKBOOK (JULY 2016)people.stern.nyu.edu/.../execs/ValuationWorkbookJuly2016.pdfColombian Peso 7.53% Baa2 South African Rand 8.75% Baa2 Croatian Kuna 3.68% Ba2 Taiwanese](https://reader034.fdocuments.us/reader034/viewer/2022042811/5fa31ba213335f388b653bd0/html5/thumbnails/20.jpg)
20
![Page 21: VALUATION WORKBOOK (JULY 2016)people.stern.nyu.edu/.../execs/ValuationWorkbookJuly2016.pdfColombian Peso 7.53% Baa2 South African Rand 8.75% Baa2 Croatian Kuna 3.68% Ba2 Taiwanese](https://reader034.fdocuments.us/reader034/viewer/2022042811/5fa31ba213335f388b653bd0/html5/thumbnails/21.jpg)
21
![Page 22: VALUATION WORKBOOK (JULY 2016)people.stern.nyu.edu/.../execs/ValuationWorkbookJuly2016.pdfColombian Peso 7.53% Baa2 South African Rand 8.75% Baa2 Croatian Kuna 3.68% Ba2 Taiwanese](https://reader034.fdocuments.us/reader034/viewer/2022042811/5fa31ba213335f388b653bd0/html5/thumbnails/22.jpg)
22
Interestcoverageratios
Interestcoverageratio=Operatingprofit/Interestexpense=17,741/1,441=12.10
22
![Page 23: VALUATION WORKBOOK (JULY 2016)people.stern.nyu.edu/.../execs/ValuationWorkbookJuly2016.pdfColombian Peso 7.53% Baa2 South African Rand 8.75% Baa2 Croatian Kuna 3.68% Ba2 Taiwanese](https://reader034.fdocuments.us/reader034/viewer/2022042811/5fa31ba213335f388b653bd0/html5/thumbnails/23.jpg)
SyntheticRatingsandDefaultSpreads
Market cap > $ 5 billion Market cap < $ 5 billion
23
![Page 24: VALUATION WORKBOOK (JULY 2016)people.stern.nyu.edu/.../execs/ValuationWorkbookJuly2016.pdfColombian Peso 7.53% Baa2 South African Rand 8.75% Baa2 Croatian Kuna 3.68% Ba2 Taiwanese](https://reader034.fdocuments.us/reader034/viewer/2022042811/5fa31ba213335f388b653bd0/html5/thumbnails/24.jpg)
24
Marginal Corporate Tax Rate- By Country (2016)
![Page 25: VALUATION WORKBOOK (JULY 2016)people.stern.nyu.edu/.../execs/ValuationWorkbookJuly2016.pdfColombian Peso 7.53% Baa2 South African Rand 8.75% Baa2 Croatian Kuna 3.68% Ba2 Taiwanese](https://reader034.fdocuments.us/reader034/viewer/2022042811/5fa31ba213335f388b653bd0/html5/thumbnails/25.jpg)
Marketvalueofequity=66,452.45M BVofdebt=TotalDebt=$28,360M
Withapre-taxcostofdebtof3%MVofdebt=1,441(PVofannuity,3years,3%)+28,360/(1.03)3=$30,029M
PVofoperatingleasesat3%767/1.03+519/1.032+382/1.033+300/1.034+202/1.035+259.5/1.036+259.5/1.037=2,187
25
![Page 26: VALUATION WORKBOOK (JULY 2016)people.stern.nyu.edu/.../execs/ValuationWorkbookJuly2016.pdfColombian Peso 7.53% Baa2 South African Rand 8.75% Baa2 Croatian Kuna 3.68% Ba2 Taiwanese](https://reader034.fdocuments.us/reader034/viewer/2022042811/5fa31ba213335f388b653bd0/html5/thumbnails/26.jpg)
26
![Page 27: VALUATION WORKBOOK (JULY 2016)people.stern.nyu.edu/.../execs/ValuationWorkbookJuly2016.pdfColombian Peso 7.53% Baa2 South African Rand 8.75% Baa2 Croatian Kuna 3.68% Ba2 Taiwanese](https://reader034.fdocuments.us/reader034/viewer/2022042811/5fa31ba213335f388b653bd0/html5/thumbnails/27.jpg)
27
![Page 28: VALUATION WORKBOOK (JULY 2016)people.stern.nyu.edu/.../execs/ValuationWorkbookJuly2016.pdfColombian Peso 7.53% Baa2 South African Rand 8.75% Baa2 Croatian Kuna 3.68% Ba2 Taiwanese](https://reader034.fdocuments.us/reader034/viewer/2022042811/5fa31ba213335f388b653bd0/html5/thumbnails/28.jpg)
Whatfreeaboutfreecashflow?
FromEarningstoCashflows28
![Page 29: VALUATION WORKBOOK (JULY 2016)people.stern.nyu.edu/.../execs/ValuationWorkbookJuly2016.pdfColombian Peso 7.53% Baa2 South African Rand 8.75% Baa2 Croatian Kuna 3.68% Ba2 Taiwanese](https://reader034.fdocuments.us/reader034/viewer/2022042811/5fa31ba213335f388b653bd0/html5/thumbnails/29.jpg)
29
![Page 30: VALUATION WORKBOOK (JULY 2016)people.stern.nyu.edu/.../execs/ValuationWorkbookJuly2016.pdfColombian Peso 7.53% Baa2 South African Rand 8.75% Baa2 Croatian Kuna 3.68% Ba2 Taiwanese](https://reader034.fdocuments.us/reader034/viewer/2022042811/5fa31ba213335f388b653bd0/html5/thumbnails/30.jpg)
30
![Page 31: VALUATION WORKBOOK (JULY 2016)people.stern.nyu.edu/.../execs/ValuationWorkbookJuly2016.pdfColombian Peso 7.53% Baa2 South African Rand 8.75% Baa2 Croatian Kuna 3.68% Ba2 Taiwanese](https://reader034.fdocuments.us/reader034/viewer/2022042811/5fa31ba213335f388b653bd0/html5/thumbnails/31.jpg)
31
![Page 32: VALUATION WORKBOOK (JULY 2016)people.stern.nyu.edu/.../execs/ValuationWorkbookJuly2016.pdfColombian Peso 7.53% Baa2 South African Rand 8.75% Baa2 Croatian Kuna 3.68% Ba2 Taiwanese](https://reader034.fdocuments.us/reader034/viewer/2022042811/5fa31ba213335f388b653bd0/html5/thumbnails/32.jpg)
32
![Page 33: VALUATION WORKBOOK (JULY 2016)people.stern.nyu.edu/.../execs/ValuationWorkbookJuly2016.pdfColombian Peso 7.53% Baa2 South African Rand 8.75% Baa2 Croatian Kuna 3.68% Ba2 Taiwanese](https://reader034.fdocuments.us/reader034/viewer/2022042811/5fa31ba213335f388b653bd0/html5/thumbnails/33.jpg)
33
![Page 34: VALUATION WORKBOOK (JULY 2016)people.stern.nyu.edu/.../execs/ValuationWorkbookJuly2016.pdfColombian Peso 7.53% Baa2 South African Rand 8.75% Baa2 Croatian Kuna 3.68% Ba2 Taiwanese](https://reader034.fdocuments.us/reader034/viewer/2022042811/5fa31ba213335f388b653bd0/html5/thumbnails/34.jpg)
34
![Page 35: VALUATION WORKBOOK (JULY 2016)people.stern.nyu.edu/.../execs/ValuationWorkbookJuly2016.pdfColombian Peso 7.53% Baa2 South African Rand 8.75% Baa2 Croatian Kuna 3.68% Ba2 Taiwanese](https://reader034.fdocuments.us/reader034/viewer/2022042811/5fa31ba213335f388b653bd0/html5/thumbnails/35.jpg)
35
![Page 36: VALUATION WORKBOOK (JULY 2016)people.stern.nyu.edu/.../execs/ValuationWorkbookJuly2016.pdfColombian Peso 7.53% Baa2 South African Rand 8.75% Baa2 Croatian Kuna 3.68% Ba2 Taiwanese](https://reader034.fdocuments.us/reader034/viewer/2022042811/5fa31ba213335f388b653bd0/html5/thumbnails/36.jpg)
36
![Page 37: VALUATION WORKBOOK (JULY 2016)people.stern.nyu.edu/.../execs/ValuationWorkbookJuly2016.pdfColombian Peso 7.53% Baa2 South African Rand 8.75% Baa2 Croatian Kuna 3.68% Ba2 Taiwanese](https://reader034.fdocuments.us/reader034/viewer/2022042811/5fa31ba213335f388b653bd0/html5/thumbnails/37.jpg)
Youcangrowanddestroyvalue..
Growthanditsvalue37
![Page 38: VALUATION WORKBOOK (JULY 2016)people.stern.nyu.edu/.../execs/ValuationWorkbookJuly2016.pdfColombian Peso 7.53% Baa2 South African Rand 8.75% Baa2 Croatian Kuna 3.68% Ba2 Taiwanese](https://reader034.fdocuments.us/reader034/viewer/2022042811/5fa31ba213335f388b653bd0/html5/thumbnails/38.jpg)
38
![Page 39: VALUATION WORKBOOK (JULY 2016)people.stern.nyu.edu/.../execs/ValuationWorkbookJuly2016.pdfColombian Peso 7.53% Baa2 South African Rand 8.75% Baa2 Croatian Kuna 3.68% Ba2 Taiwanese](https://reader034.fdocuments.us/reader034/viewer/2022042811/5fa31ba213335f388b653bd0/html5/thumbnails/39.jpg)
39
![Page 40: VALUATION WORKBOOK (JULY 2016)people.stern.nyu.edu/.../execs/ValuationWorkbookJuly2016.pdfColombian Peso 7.53% Baa2 South African Rand 8.75% Baa2 Croatian Kuna 3.68% Ba2 Taiwanese](https://reader034.fdocuments.us/reader034/viewer/2022042811/5fa31ba213335f388b653bd0/html5/thumbnails/40.jpg)
Pre-taxReturnoncapital=OperatingIncome/(BVofDebtlastyear+BVofEquitylastyear–Cashlastyear)=17741/(22,623+55,734-6,361)=24.64%
After-taxReturnoncapital=Pre-taxReturnoncapital(1- taxrate)=24.64%(1-.4603)=.1330or13.30%Taxrateused:Effectivetaxrate(fromthispage)40
![Page 41: VALUATION WORKBOOK (JULY 2016)people.stern.nyu.edu/.../execs/ValuationWorkbookJuly2016.pdfColombian Peso 7.53% Baa2 South African Rand 8.75% Baa2 Croatian Kuna 3.68% Ba2 Taiwanese](https://reader034.fdocuments.us/reader034/viewer/2022042811/5fa31ba213335f388b653bd0/html5/thumbnails/41.jpg)
41
![Page 42: VALUATION WORKBOOK (JULY 2016)people.stern.nyu.edu/.../execs/ValuationWorkbookJuly2016.pdfColombian Peso 7.53% Baa2 South African Rand 8.75% Baa2 Croatian Kuna 3.68% Ba2 Taiwanese](https://reader034.fdocuments.us/reader034/viewer/2022042811/5fa31ba213335f388b653bd0/html5/thumbnails/42.jpg)
42
![Page 43: VALUATION WORKBOOK (JULY 2016)people.stern.nyu.edu/.../execs/ValuationWorkbookJuly2016.pdfColombian Peso 7.53% Baa2 South African Rand 8.75% Baa2 Croatian Kuna 3.68% Ba2 Taiwanese](https://reader034.fdocuments.us/reader034/viewer/2022042811/5fa31ba213335f388b653bd0/html5/thumbnails/43.jpg)
43
ReturnSpreadsGlobally….43
![Page 44: VALUATION WORKBOOK (JULY 2016)people.stern.nyu.edu/.../execs/ValuationWorkbookJuly2016.pdfColombian Peso 7.53% Baa2 South African Rand 8.75% Baa2 Croatian Kuna 3.68% Ba2 Taiwanese](https://reader034.fdocuments.us/reader034/viewer/2022042811/5fa31ba213335f388b653bd0/html5/thumbnails/44.jpg)
Price≠Value
ThePricingGame44
![Page 45: VALUATION WORKBOOK (JULY 2016)people.stern.nyu.edu/.../execs/ValuationWorkbookJuly2016.pdfColombian Peso 7.53% Baa2 South African Rand 8.75% Baa2 Croatian Kuna 3.68% Ba2 Taiwanese](https://reader034.fdocuments.us/reader034/viewer/2022042811/5fa31ba213335f388b653bd0/html5/thumbnails/45.jpg)
45
![Page 46: VALUATION WORKBOOK (JULY 2016)people.stern.nyu.edu/.../execs/ValuationWorkbookJuly2016.pdfColombian Peso 7.53% Baa2 South African Rand 8.75% Baa2 Croatian Kuna 3.68% Ba2 Taiwanese](https://reader034.fdocuments.us/reader034/viewer/2022042811/5fa31ba213335f388b653bd0/html5/thumbnails/46.jpg)
46
![Page 47: VALUATION WORKBOOK (JULY 2016)people.stern.nyu.edu/.../execs/ValuationWorkbookJuly2016.pdfColombian Peso 7.53% Baa2 South African Rand 8.75% Baa2 Croatian Kuna 3.68% Ba2 Taiwanese](https://reader034.fdocuments.us/reader034/viewer/2022042811/5fa31ba213335f388b653bd0/html5/thumbnails/47.jpg)
47
![Page 48: VALUATION WORKBOOK (JULY 2016)people.stern.nyu.edu/.../execs/ValuationWorkbookJuly2016.pdfColombian Peso 7.53% Baa2 South African Rand 8.75% Baa2 Croatian Kuna 3.68% Ba2 Taiwanese](https://reader034.fdocuments.us/reader034/viewer/2022042811/5fa31ba213335f388b653bd0/html5/thumbnails/48.jpg)
48
![Page 49: VALUATION WORKBOOK (JULY 2016)people.stern.nyu.edu/.../execs/ValuationWorkbookJuly2016.pdfColombian Peso 7.53% Baa2 South African Rand 8.75% Baa2 Croatian Kuna 3.68% Ba2 Taiwanese](https://reader034.fdocuments.us/reader034/viewer/2022042811/5fa31ba213335f388b653bd0/html5/thumbnails/49.jpg)
49
![Page 50: VALUATION WORKBOOK (JULY 2016)people.stern.nyu.edu/.../execs/ValuationWorkbookJuly2016.pdfColombian Peso 7.53% Baa2 South African Rand 8.75% Baa2 Croatian Kuna 3.68% Ba2 Taiwanese](https://reader034.fdocuments.us/reader034/viewer/2022042811/5fa31ba213335f388b653bd0/html5/thumbnails/50.jpg)
50
![Page 51: VALUATION WORKBOOK (JULY 2016)people.stern.nyu.edu/.../execs/ValuationWorkbookJuly2016.pdfColombian Peso 7.53% Baa2 South African Rand 8.75% Baa2 Croatian Kuna 3.68% Ba2 Taiwanese](https://reader034.fdocuments.us/reader034/viewer/2022042811/5fa31ba213335f388b653bd0/html5/thumbnails/51.jpg)
51
![Page 52: VALUATION WORKBOOK (JULY 2016)people.stern.nyu.edu/.../execs/ValuationWorkbookJuly2016.pdfColombian Peso 7.53% Baa2 South African Rand 8.75% Baa2 Croatian Kuna 3.68% Ba2 Taiwanese](https://reader034.fdocuments.us/reader034/viewer/2022042811/5fa31ba213335f388b653bd0/html5/thumbnails/52.jpg)
52