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Valuation methods - Coggle Diagram

- - - - Going concern
      - Already established
      - Earnings history
      - Continuing earnings expected to be maintained
      - Maintainable earnings are expected to be positive
      - Similar competitor listed entity available
      - Non-operating asset of entity is valued separately
      - When used to value multi-business entity - each entity treated separately
  - - - P/E = Current full market capitalisation / total diluted headline earnings
      - P/E = 1/ earnings yield %
      - P/E = Closing market price per share / Diluted headline earnings per share
    - - EY % = Diluted headline earnings per share / closing market price per share x 100
      - EY% = total diluted headline earnings / current full market capitalisaion x 100
      - EY% = 1 / PE x 100
  - - - less sensitive to differences between entities in terms of
        
        Level of gearing
        
        Effective tax rates and depreciation policies
- - - - Effect of capital expenditure & working capital investment that's necessary
      - Tax effect
    - - Non-operational cash inflow
      - Finance related cash outflow
    - - Projected figures and the discount rate is comparable
      - Projected figures and discount rate should not duplicate the effect of risk
      - Should include the effects of capital expenditure and investment in working capital
  - - - Going concern
      - Expected free cash flow can be readily forecast
      - Entity maintain and will continue to maintain, a stable capital structure, based in target WACC
      - Non-operating asset of entity is valued separatly
      - When use to value multi-business entity, treat each business seperatly
- - - - Source of value to SH is essentially only the future stream of dividends
      - Dividend in formula represents a sustainable div
      - Going concern
      - Expected div growth is lower than than discount rate
      - Growth rate is constant
  - - - Deductive methods (market data to determine cost)
      - Risk-return methods (base rate + premium)
        
        CAPM
- - - - Value of business is principally represented by assets rather than earnings
      - Business does not generate sufficient return on assets, where higher value can be obtained by business selling assets
      - Reasonability test