Develop an industry-specific business system

Reference no: EM132979384

Valuation Model Building

Learning objective 1: To help students understand the power (and limitations) of financial models

Learning objective 2: Through "hands on" application, students will learn how the various steps of the modeling process

Help to identify the primary determinants of firm cash flows (Step 1 of the modeling process),

Require 3 to 5 year projections of annual cash flows during the "planning period" (Step 2 of the modeling process), and

Require the estimation of the present value of projected annual cash flows, including a terminal value (Step 3 of the modeling process)
Estimating synergies

How to make adjustments for Dilutive Impact of Target Options and Convertible Securities

1. Develop an industry-specific business system.

2. Develop a baseline for costs as if the two companies remained inde-pendent. Make sure the baseline costs are consistent with the intrin-sic valuations.

3. Estimate the synergies for each cost category based on the expertise of experienced line managers.

4. Compare aggregate improvements with margin and capital effi-ciency benchmarks to judge whether the estimates are realistic given industry economics.

Reference no: EM132979384

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