Transcript Diapositiva 1

VALORACION
ECONOMICA DE
EMPRESAS
Manuel Carreño 2010
®
Financing and
Valuation
McGraw-Hill/Irwin
Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved
Capital Project Adjustments
1. Adjust the Discount Rate
 Modify the discount rate to reflect capital
structure, bankruptcy risk, and other factors.
2. Adjust the Present Value
 Assume an all equity financed firm and then
make adjustments to value based on financing.
After Tax WACC
Tax Adjusted Formula
E
D 
WACC  rD  (1  Tc)      rE  
V
V  
After Tax WACC
Example - Sangria Corporation
The firm has a marginal tax rate of 35%. The cost of
equity is 12.4% and the pretax cost of debt is 6%.
Given the book and market value balance sheets,
what is the tax adjusted WACC?
After Tax WACC
Example - Sangria Corporation - continued
Balance Sheet (Book Value, millions)
Assets
1,000
500
Debt
500
Equity
Total assets
1,000
1,000 Total liabilities
After Tax WACC
Example - Sangria Corporation - continued
Balance Sheet (Market Value, millions)
Assets
1,250
500
Debt
750
Equity
Total assets
1,250
1,250 Total liabilities
After Tax WACC
Example - Sangria
Corporation - continued
Debt ratio = (D/V) = 500/1,250 = .4 or 40%
Equity ratio = (E/V) = 750/1,250 = .6 or 60%
E
D 
WACC  rD  (1  Tc)      rE  
V
V  
After Tax WACC
Example - Sangria Corporation - continued
E
D 
WACC  rD  (1  Tc)      rE  
V
V  
WACC  .06  (1  .35).40  .124.60
 .090
 9.0%
After Tax WACC
Example - Sangria Corporation - continued
The company would like to invest in a perpetual
crushing machine with cash flows of $1.731
million per year pre-tax.
Given an initial investment of $12.5 million,
what is the value of the machine?
After Tax WACC
Example - Sangria Corporation - continued
The company would like to invest in a perpetual crushing machine with cash flows of $1.731 million
per year pre-tax. Given an initial investment of $12.5 million, what is the value of the machine?
Cash Flows
Pretax cash flow
Tax @ 35%
After-tax cash flow
1.731
0.606
$1.125 million
After Tax WACC
Example - Sangria Corporation - continued
The company would like to invest in a perpetual crushing machine with cash flows of $1.731
million per year pre-tax. Given an initial investment of $12.5 million, what is the value of the
machine?
C1
NPV  C0 
rg
1.125
 12.5 
.09
0
After Tax WACC
Example - Sangria Corporation – continued
Perpetual Crusher project
Balance Sheet - Perpetual Crusher (Market Value, millions)
Assets
12.5
5.0
Debt
7.5
Equity
Total assets
12.5
12.5
Total liabilities
After Tax WACC
Example - Sangria Corporation – continued
Perpetual Crusher project
After tax interest  rD (1  TC ) D  .06  (1  .35)  5  .195
Expected equity income  C  rD (1  TC ) D  1.125  .195  0.93
After Tax WACC
Example - Sangria Corporation – continued
Perpetual Crusher project
expectedequity income
Expectedequity return  rE 
equity value
0.93

 .124 or 12.4%
7.5
Capital Budgeting
Valuing a Business or Project
• The value of a business or Project is usually
computed as the discounted value of FCF out to a
valuation horizon (H).
• The valuation horizon is sometimes called the
terminal value.
FCF1
FCF2
FCFH
PVH
PV 

 ... 

1
2
H
(1  wacc) (1  wacc)
(1  wacc)
(1  wacc) H
Capital Budgeting
• Valuing a Business or Project
FCF1
FCF2
FCFH
PVH
PV 

 ... 

1
2
H
H
(1  r ) (1  r )
(1  r )
(1  r )
PV (free cash flows)
In this case r = wacc
PV (horizon value)
Valuing a Business
Example: Rio Corporation
1
2
3
4
5
6
7
8
9
10
Sales
Cost of goods sold
EBITDA (1-2)
Depreciation
Profit before tax (EBIT) (3-4)
Tax
Profit after tax (5-6)
Investment in fixed assets
Investment in working capital
Free cash flow (7+4-8-9)
Latest year
0
83.6
63.1
20.5
3.3
17.2
6
11.2
11
1
2.5
PV Free cash flow, years 1-6
PV Horizon value
PV of company
20.3
67.6
87.9
1
89.5
66.2
23.3
9.9
13.4
4.7
8.7
14.6
0.5
3.5
2
95.8
71.3
24.4
10.6
13.8
4.8
9
15.5
0.8
3.2
Forecast
3
4
102.5
106.6
76.3
79.9
26.1
26.6
11.3
11.8
14.8
14.9
5.2
5.2
9.6
9.7
16.6
15
0.9
0.5
3.4
5.9
5
110.8
83.1
27.7
12.3
15.4
5.4
10
15.6
0.6
6.1
6
115.2
87
28.2
12.7
15.5
5.4
10.1
16.2
0.6
6
113.4 (Horizon value in year 6)
7
118.7
90.2
28.5
13.1
15.4
5.4
10
15.9
0.4
6.8
Valuing a Business
Example: Rio Corporation – continued - assumptions
Assumptions
Sales growth (percent)
6.7
75.5
13.3
79.2
5
Tax rate, percent
WACC
Long term growth forecast
35%
9%
3%
7
74
13
79
14
7
74.5
13
79
14
7
74.5
13
79
14
4
75
13
79
14
4
75
13
79
14
4
75.5
13
79
14
3
76
13
79
14
109.6
38.9
70.7
9.9
11.6
125.1
49.5
75.6
10.6
12.4
141.8
60.8
80.9
11.3
13.3
156.8
72.6
84.2
11.8
13.9
172.4
84.9
87.5
12.3
14.4
188.6
97.6
91
12.7
15
204.5
110.7
93.8
13.1
15.4
Fixed assets and working capital
Gross fixed assets
Less accumulated depreciation
Net fixed assets
Depreciation
Working capital
95
29
66
3.3
11.1
Valuing a Business
Example: Rio Corporation – continued
FCF = Profit after tax + depreciation + investment in fixed
assets + investment in working capital
FCF = 8.7 + 9.9 – (109.6 - 95.0) – (11.6 - 11.1) =
$3.5 million
Valuing a Business
Example: Rio Corporation – continued
.80 .96
1.15 1.39
.20
.23
PV(FCF)  




2
3
4
5
6
1.1 1.1 1.1 1.1 1.1 1.1
 3.6
Valuing a Business
Example: Rio Corporation – continued
FCFH 1  6.8 
Horizon Value  PVH 

  113.3
wacc  g  .09  .03 
1
PV(horizon value) 
 113.3  $67.6
6
1.09
Valuing a Business
Example: Rio Corporation – continued
PV(busines s)  PV(FCF)  PV(horizon value)
 20.3  67.6
 $87.9 million
WACC & Debt Ratios
Example continued: Sangria and the Perpetual Crusher
project at 20% D/V
Step 1 – r at current debt of 40%
r  .06(.4)  .124(.6)  .0984
Step 2 – D/V changes to 20%
rE  .0984 (.0984 .06)(.25)  .108
Step 3 – New WACC
WACC  .06(1  .35)(.2)  .108(.8)  .0942
Adjusted Present Value
APV = Base Case NPV
+ PV Impact
• Base Case = All equity finance firm NPV
• PV Impact = all costs/benefits directly
resulting from project
Adjusted Present Value
Example:
Project A has an NPV of $150,000. In order to
finance the project we must issue stock, with a
brokerage cost of $200,000.
Adjusted Present Value
Example:
Project A has an NPV of $150,000. In order to
finance the project we must issue stock, with a
brokerage cost of $200,000.
Project NPV =
150,000
Stock issue cost = -200,000
Adjusted NPV
- 50,000
don’t do the project
Adjusted Present Value
Example:
Project B has a NPV of -$20,000. We can issue
debt at 8% to finance the project. The new
debt has a PV Tax Shield of $60,000. Assume
that Project B is your only option.
Adjusted Present Value
Example:
Project B has a NPV of -$20,000. We can issue
debt at 8% to finance the project. The new debt
has a PV Tax Shield of $60,000. Assume that
Project B is your only option.
Project NPV =
- 20,000
Stock issue cost = 60,000
Adjusted NPV
40,000
Do the project
Adjusted Present Value
Example – Rio Corporation APV
10 Free cash flow (7+4-8-9)
PV Free cash flow, years 16
Pv Horizon value
Base-case PV of company
Debt
PV Interest tax shields
APV
Tax rate, percent
Opportunity cost of capital
WACC (To discount horizon
value to year 6)
Lomg term growth forecast
Interest rate (years 1-6)
After tax debt service
Latest year
0
2,5
1
3,5
2
3,2
50
3,06
1,07
49
3
1,05
2,99
2,95
Forecast
3
3,4
4
5,9
5
6,1
6
6
48
2,94
1,03
47
2,88
1,01
46
2,82
0,99
45
2,76
0,97
2,91
2,87
2,83
2,79
19,7
64,6
84,3
51
5
89,3
35%
9,84%
9%
3%
6%
7
6,8
Adjusted Present Value
Example – Rio Corporation APV - continued
APV  Base case NPV  PV(Interest taxshields)
 84.3  5.0  $89.3m illion