What if the company has FCF? what do we need to do in order to estimate a reasonable positive Future FCF for DCF model to work?
@bullypop6545
2 жыл бұрын
Great video!
@abdulrana4092
3 жыл бұрын
Great vid
@TheJaebeomPark
3 жыл бұрын
love it~!
@SagarPatel-gw9ub
Жыл бұрын
Hi Michael...this is super, super helpful and helped me understand a lot which I am been searching from a while. However, I have a question, after having TV, how to approach to calculate price/free cash flow? Instead of price/EBIT ? Would be awesome if you can take any real life ticker as an example to get to TV to price/FCF. Thank you bunch!
@MichaelWardFinance
Жыл бұрын
Yes, Price/FreeCashFlow would be a better metric (than Price/EBIT) to "triangulate" the final terminal value. I only use Price/EBIT because this is a more commonly used metric. If you were to calculate the median current Price/FCF for similar companies, this would be more appropriate - I agree.
@afonsoluz7527
Жыл бұрын
Hey, this is very important. Where did you see the historical growth rate of GDP between 1872 and today? Thank you.
Which WACC to use if the cost of debt is 0% and there is no equity ? The case of a startup ?
@MichaelWardFinance
2 жыл бұрын
The Weighted Average Cost of Capital must reflect the weighted expected returns of the investors of the start-up.
@tomadawa6859
Жыл бұрын
Is this Jordan model
@piranha_finance
Жыл бұрын
Hi Michael, is the WACC value used pretax or aftertax?
@MichaelWardFinance
Жыл бұрын
Hi Making Sales - WACC should always be after tax.
@Unknowledgeable1
11 ай бұрын
2:09 Why does g have to be less than wacc? 5:30 6:30 Terminal value is calculated using a perpetuity calculation - terminal value approaches infinity meaning explosion of value 7:12 But I think these represent the dollar amount of completed transactions in the economy. And this gdp and its growth rate can be a good proxy for the growth rate of the free cash flows of the firm because the free cash flows of the firm increases when it successfully completes more transactions. So maybe we caj assume that the transaction growth rate of the firm is the same as the transaction growth rate of the economy. Do you think this is a reasonable argument for why they compare g with the gdp growth rate?
@MichaelWardFinance
11 ай бұрын
If "g" is equal to WACC the denominator is zero, implying a huge terminal value of infinity. If "g" is greater than WACC, the terminal value is negative, implying the company is destroying value each year thereafter. Of course investors would close/liquidate the company in this scenario. One must not blindly use the terminal value calculation; a reality check is necessary.
@Unknowledgeable1
10 ай бұрын
@@MichaelWardFinance Thanks Michael! Do you by any chance know what source (e.g. paper, textbook) you got the rule of thumb that the denominator of (r-g) shouldn't be less than 3% from?
@shivangiagrawal7700
5 ай бұрын
Can you tell why growth rate subtract from wacc
@MichaelWardFinance
5 ай бұрын
The present value of a growing perpetuity can be calculated using the Gordon Growth model, which states PV=FCF/(Wacc-g) where g is constant.
@omm5960
2 жыл бұрын
Very helpful. I believe you meant 'GDP growth' not 'GDP.'
@MichaelWardFinance
2 жыл бұрын
Yes indeed, 'GDP growth' and not 'GDP' is correct, apologies.
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