Ncis

APPLIED CORPORATE FINANE

Useful website www.stern.nyu.edu

Check Damodaran website for industry ratios and multiples and macro data

Understand Grant (Contemporary Strategy Analysis)

* Objectives

* Resources

* Competitive Environment

* Implement Well

MAXIMISE THE VALUE OF THE FIRM

Investment Decision

* Invest in projects that yield a return greater than the hurdle rate

Financing Decision

* Choose a financing mix that maximizes the value of the project taken, and grows the business

Dividend Decision

* If there are not enough investments that earn the hurdle, return the cash to the owners. Should the cash be returned in the form of dividends, or stock buybacks, or spin offs?

SHAREHOLDER VALUE

What drives shareholder value and hence equity returns?

Strategic Value Drivers – Risk, Return and Growth

Financial Value Drivers – Sales Growth, EBIT margins, Cash Taxes, Working Capital, Capex, CAP (Competitive Advantage Period)

Operational Value Drivers – Unit Sales, product mix, overheads, selling terms, innovation, funding

You can agree price but you may not agree terms, its very important that selling terms are in line and favourable. Main reason why deals don’t happen because terms are disagreed.

How can you assess if the company you are reviewing is in an attractive space?

How can you assess an attractive industry?

Use I, C, F, M, V framework aside from Porter and etc.

Frame your Equity Analysis: ICFMV

* Macro Environment

* I – Industry (Use SWOT, Porters 5 forces framework, what are the drivers in the industry and KSFs)

* C – Competitive Advantage (What drivers contribute to the advantage)

* F – Financials

* M – Management

* V – Valuation

* C – Catalyst (specially for listed companies)