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Corporate Finance - WBS - Coggle Diagram
Corporate Finance - WBS
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Shortcuts
- Annuity
- Growing Annuity
- Perpetuity
- Growing Perpetuity
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DCF
NPV = f (FCF, discount rate)
NPV = PV(Benefits) - PV (Costs)
NPV>0 = Accept
NPV<0 = Reject
Free Cash Flows
FCF = (Revenues - Costs - Depreciation / Amortization) * (1 - marginal tax rate) + Depreciation - Capital Expenditure - Change in net working capital
NWC = (Current assets - Current liabilities)
NWC = Cash + Inventory + AR - AP
FCFE = FCF - Interest * (1 - marginal tax rate) + Net borrowing
Forecast Drivers
Revenue = Market size x Market Share x Price
Costs = Cost margin x Revenue
Costs = R&D Expenditure
Change in NWC = NWC (t) - NWC (t-1)
DCF Analysis & ROI
IRR is rate of return @ NPV = 0
If IRR > Hurdle rate or discount rate, undertake the project
Use IRR carefully as it can mislead in changing cashflows
NPV is always the best
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