Corporate Finance and Valuation Techniques

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Course Features

  • Course date:05/21/2020
  • Course Duration: 2 day
  • Level: Intermediate
  • Prerequisites: None
  • Method: Live & Virtual
  • Venue: 115 Broadway, NY, NY 10006
  • Time: 9:00 am – 5:00 pm
  • Dress Code: Business Casual

Corporate Finance and Valuation Techniques

Corporate Finance is an essential foundation for all financial decisions of a firm. A vast range of business decisions from credit analysis to merger and acquisition activity requires knowledge of basic financial principles. These basic principles are taught in a course by a seasoned instructor who will use both theory and practical applications. While there are procedures and formulas, they need to be integrated with good business judgments. Included in the practical applications will be exercises and reference to a company case. The eventual objective will be to explore methods of evaluating a firm and enhancing it with various corporate finance strategies.

Targeted Audience

Individuals in financial intern programs; those wishing to seek and enhance their positions in investment banking, private equity, venture capital, and valuation. Knowledge of the capital markets and financial accounting statements. A financial calculator is required. (Texas Instruments BA II Plus will be taught.) At times, Excel techniques will be demonstrated, but not taught.

Learning Objectives

Students will be able to:

  • Solve problems using various time value of money concepts
  • Identify statistical issues
  • Identify the relevant costs in a project
  • Calculate and compare advantages and weaknesses of capital budgeting techniques, especially the NPV and IRR of a project
  • Demonstrate how different qualitative factors impact on the value
  • Calculate free cash flow forecasts and the challenges in determining their proper use
  • Calculate the terminal value of a business and determine its appropriate use
  • Calculate the enterprise and equity value of a business
  • Discuss Behavioral Issues
  • Discuss Relative Valuations Techniques among comparable companies
  • Explain why WACC is used to discount company free cash flows
  • Calculate WACC, cost of debt and cost of equity
  • Discuss other valuation methods including CAPM and Arbitrage Pricing Theory
  • Determine the optimal capital structure of a company and its dividend policy

Introduction and course overview

  • The importance and benefits of Corporate Finance
  • Examples of where and how Corporate Finance is used in capital markets
  • The linkage between investment and financing decisions
  • Agency issues and Ethics
  • Capital Market Risk/Reward concepts and Index Issues
  • Overview of topics to be covered



Basic Calculations

Time Value of Money

  • Present and Future Value Concepts and Calculations
  • Compounding (annual, periodic, continuous)
  • Annuities and Perpetuities
  • Complex Problems
  • Statistical issues

Exercises: Class participants will do Time Value Problems

Project Analysis / Capital Budgeting

  • Capital budgeting
  • Process of capital budgeting
  • Identifying cash flows
  • Incremental cash flows
  • Inflation i.e., constant vs. current dollar cash flows
  • Issues around the identification of cash flows
  • Working Capital Considerations

Exercise: Identifying relevant costs

Payback and Discounted Payback

  • Drawbacks: time value of money; life after the payback period
  • Internal Rate of Return (IRR)
  • Drawbacks: lending/borrowing; multiple rates of return; mutually exclusive projects
  • Net present value (NPV)
  • Making decisions with NPV
  • Profitability Index
  • Modified IRR, calculations and reasons
  • Separating the financing and investment decisions

Exercise: Using different methods to evaluate projects

Company Financials and Discounted Cash Flow ValuationFinancials Section

Brief Review of Financial Statements

  • Locating Financial Information
  • Issues and hidden traps with accounting numbers
  • Accruals versus cash flows
  • Differential interpretation of GAAP  and IFRS, non-Gaap and non-IFRS

Dividend Valuation Model

  • Dividend Discount Model and the key decisions on time periods
  • Perpetual and Gordon Growth Model
  • Estimating growth with various methods and their challenges

DCF Overview

  • The rationale for DCF valuation
  • Characteristics of a DCF
  • Analyzing the historic performance and looking at the operating environment with tools such as PESTEL, Porter, SWOT, Product life cycle

Exercise: Determining the operating environment of the case study

Forecasting Cash Flows

  • Cash Flows: Accounting and the challenging economic environment
  • Behavioral issues with forecasting cash flows
  • Calculating various free cash flows, Firm, Equity, EBITDA, NOPAT
  • Key areas to forecast and their sources
  • Determining the tradeoff on yearly cash flows and the Terminal Value
  • Real versus nominal returns

Exercise: Calculate the free cash flows for the company case study

Terminal Value

  • Asset Values
  • Using relative or comparable values (EV/EBITDA and EV/EBIT)
  • Perpetuities and growing perpetuities
  • Exotic measures for special industries

Exercise: Determine an appropriate terminal value for the company case study

Valuation Enterprise Value versus Equity Value

  • Calculate Enterprise and Equity Values
  • Enterprise back door and front door methods
  • EVA

Exercise: Calculate the company case study Enterprise and Equity values


DAY TWO – Cost of Capital and Capital Structure

Risk and Valuation Section

Relative Valuation Techniques

  • Peer group valuation challenges
  • Key ratios and their trade-offs, especially with the ratios of P/E, PEG, EV/EBITDA, MV/BV
  • Special ratios for unique industries

Exercise: Calculate the value of the company case study using peer group analysis

Basics of the cost of capital

  • Risk versus Return overview
  • Theoretical perspectives
  • Systematic and unsystematic risk
  • Beta concepts

Weighted Average Cost of Capital

  • WACC overview

Cost of Debt –

  • Yield-to-maturity and spreads over US Government bonds
  • Impact of taxes
  • Bank Debt
  • Straight bonds – fixed and floating rates
  • Concepts on Convertible Bonds
  • Leases

Exercise: Calculate the cost of debt for the company case study if there is debt, but also if the company has to incur debt

Cost of Equity

  • Preferred Shares
  • Common Shares
  • Dividend Discount Model
  • Leveraged Beta Considerations
  • Capital Asset Pricing Model
  • Arbitrage Pricing Theory

Exercise: Calculate the company case study cost of equity using different approaches

Weighted Average Cost of Capital

  • Time-Varying
  • Factors that can affect WACC

Exercise: Calculate the company’s case study WACC

Optimal Capital Structure

  • In theory
  • In practice
  • Dividend policy

Exercise: What is the optimal capital structure for the company case study, and how can it be influenced by strategic growth objectives


Putting  It All Together

Determining the valuation of a company case



  • V. John Palicka CFA CMT  has over 30 years of experience in researching and managing money in global, emerging, and US small-cap stocks.  He is currently in his 27th year as President and Chief Portfolio Manager at Global Emerging Growth Capital (GEGC). GEGC provides three major financial services: asset management, corporate finance, and knowledge consulting …
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