Thank you very much for the video.I have just found out that the concept underlying discounted Cash Flow analysis is based on the Present Value of future cash flow with Weighted Average Cost of Capital as the discount rate
1:00 it raise to the power of 2. 1:30 a terminal value 2:20 so we add it all up from present 500 mio $ to the future 800 mio $. 2:35 cost of capital depends on capital structure of a business and the level of the risk. 3:00 we multiple this by their respective costs, and we arrive to the contribution to the cost of capital of each. so to sum it up, the total of cos to capital 3:35 this company have a WACC of 8.2%
i think that depends on if tax laws in the country which the company operates in provides tax benefits for paying debts, in most countries they do i believe. hence multiples the 1-t as you mentioned
The discounted cash flow method of valuation takes into account the time value of money and the required rate of return that investors expect to receive. The time value of money states that money in the present is worth more than the same sum of money to be received in the future, because the money a company currently owns can be invested to earn a return. In other words, the value of equal cash flow payments (in this example, $100) is being reduced over time due to the effect of discounting. The value of firm calculated in the video can be referred to as the net present value of all the future cash flows and the terminal value of the firm. It is calculated by taking individual cash flows and discounting them back to the present using the discount rate of 10% (which is the investors' expected return). To learn more about DCF and time value of money, feel free to read CFI's guides: corporatefinanceinstitute.com/resources/knowledge/valuation/dcf-formula-guide/ and corporatefinanceinstitute.com/resources/knowledge/valuation/time-value-of-money/
Thank you very much for the video.I have just found out that the concept underlying discounted Cash Flow analysis is based on the Present Value of future cash flow with Weighted Average Cost of Capital as the discount rate
1:00 it raise to the power of 2.
1:30 a terminal value
2:20 so we add it all up from present 500 mio $ to the future 800 mio $.
2:35 cost of capital depends on capital structure of a business and the level of the risk.
3:00 we multiple this by their respective costs, and we arrive to the contribution to the cost of capital of each. so to sum it up, the total of cos to capital
3:35 this company have a WACC of 8.2%
Cost of Capital has another name called WACC (Weighted Avarage Cost of Capital) right?
Thank you
You're welcome!
How do you get the cost of debt? and cost of equity?
The cost of debt it's the interest, the cost of equity it's the dividends
They have a formula to calculate those
Capital Asset Pricing Model (CAPM) formula = cost of equity.
Settling for a Debt-Equity Ratio for 1.5 ie 60/40
isnt't debt need to be multiplied by (1-t)?
i think that depends on if tax laws in the country which the company operates in provides tax benefits for paying debts, in most countries they do i believe. hence multiples the 1-t as you mentioned
How can I determine the discount value??
3:38 never mind
Can you explain where you got the value of 565 million today is 800 million in future?
The discounted cash flow method of valuation takes into account the time value of money and the required rate of return that investors expect to receive. The time value of money states that money in the present is worth more than the same sum of money to be received in the future, because the money a company currently owns can be invested to earn a return. In other words, the value of equal cash flow payments (in this example, $100) is being reduced over time due to the effect of discounting. The value of firm calculated in the video can be referred to as the net present value of all the future cash flows and the terminal value of the firm. It is calculated by taking individual cash flows and discounting them back to the present using the discount rate of 10% (which is the investors' expected return).
To learn more about DCF and time value of money, feel free to read CFI's guides: corporatefinanceinstitute.com/resources/knowledge/valuation/dcf-formula-guide/ and corporatefinanceinstitute.com/resources/knowledge/valuation/time-value-of-money/
@@CFI_Official how do you get 9% cost of equity? After tax 90% x 10% (expected return)?
All Businesses require a return of Two Fruits and a Risk not exceeding seven Degrees
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Alguien me puede decir si hay algún video en español o traducido que diga lo mismo, no he podido entender algunas cosas 😥😥😥