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connectcode .net barcode sdk PART ONE Business Valuation in Software
PART ONE Business Valuation Create QR Code ISO/IEC18004 In None Using Barcode creation for Software Control to generate, create QR Code ISO/IEC18004 image in Software applications. QR Code Recognizer In None Using Barcode scanner for Software Control to read, scan read, scan image in Software applications. Congratulations! You have just performed your first business valuation! You could have stopped after the fourth step, so you could have done this in one or two minutes once you have a forecast of economic net income and the Payout Ratio QR Code ISO/IEC18004 Generation In Visual C#.NET Using Barcode maker for .NET Control to generate, create QR image in .NET framework applications. Paint QR Code In .NET Using Barcode printer for ASP.NET Control to generate, create QR Code image in ASP.NET applications. Shortcut Midyear Gordon Model Formula
QR Code Creation In .NET Using Barcode encoder for .NET Control to generate, create QR Code image in .NET applications. Encode QR In VB.NET Using Barcode drawer for .NET framework Control to generate, create QRCode image in Visual Studio .NET applications. As you have seen in Table 61, most small businesses should require rates of return of 23 to 26 percent The square root of one plus those two numbers are 111 and 112, respectively For mathematical ease, we can approximate the midyear correction for small business as being about 10 percent We can then use Equation 64 as a quickanddirty Gordon Model formula approximation: FMV 11 1 r g CFt Creating DataMatrix In None Using Barcode creator for Software Control to generate, create ECC200 image in Software applications. Generate Code 128A In None Using Barcode creation for Software Control to generate, create Code 128 Code Set A image in Software applications. (64) Barcode Generation In None Using Barcode maker for Software Control to generate, create barcode image in Software applications. EAN / UCC  13 Creation In None Using Barcode drawer for Software Control to generate, create GTIN  128 image in Software applications. In other words, this approximation formula for midyear cash flows is 10 percent larger than the EndofYear GMM The approximation works over a wide range of firms, with fairly little error While we do not use Equation 64 in this chapter, we will make use of it later in the book UPC A Maker In None Using Barcode printer for Software Control to generate, create GS1  12 image in Software applications. Code 39 Creation In None Using Barcode printer for Software Control to generate, create Code39 image in Software applications. VALUATION WHEN A FIRM IS NOT MATURE
Postnet Creator In None Using Barcode creator for Software Control to generate, create USPS POSTal Numeric Encoding Technique Barcode image in Software applications. Recognizing EAN / UCC  13 In Visual C#.NET Using Barcode reader for .NET framework Control to read, scan read, scan image in VS .NET applications. The foregoing valuation is fine for an already mature firm If it will take, let s say, five years to reach maturity, first you will need to discount the first five years of cash flows to present value, as you learned in 5 Then you will forecast Year Six economic cash flow, determine the appropriate GMM given your forecast of constant growth in cash flows and your best initial estimate of the value of the firm and multiply your tentative GMM times Year Six economic cash flow The result of that multiplication is the present value of the Years Six to infinity cash flows as of the end of Year Five Then you will discount that back five years to present value as of time zero (now), and add the present value of Years One through Five cash flows This becomes a tentative FMV of your company You will need to go through the iteration process to make sure that the Encode GTIN  128 In VB.NET Using Barcode creator for Visual Studio .NET Control to generate, create UCC.EAN  128 image in .NET framework applications. Scanning UPC  13 In VS .NET Using Barcode decoder for Visual Studio .NET Control to read, scan read, scan image in .NET framework applications. TABLE
Generate Barcode In .NET Framework Using Barcode creator for Reporting Service Control to generate, create bar code image in Reporting Service applications. Creating Bar Code In C# Using Barcode generation for .NET Control to generate, create barcode image in VS .NET applications. Gordon Model Multiples
Create EAN 13 In None Using Barcode drawer for Office Word Control to generate, create GTIN  13 image in Microsoft Word applications. Decode DataMatrix In None Using Barcode reader for Software Control to read, scan read, scan image in Software applications. Section 1 [1] 2% 73 64 57 55 53 53 51 50 49 47 45 44 43 43 42 41 43 44 45 47 45 44 45 47 46 48 50 49 49 47 46 47 49 52 49 51 53 51 53 56 59 56 54 53 51 51 49 48 52 55 57 61 54 56 59 63 55 58 61 65 69 67 64 62 59 57 55 54 53 52 50 56 59 62 66 70 58 61 64 69 73 60 63 67 71 76 82 78 75 74 71 68 66 62 60 58 56 56 54 53 68 72 77 83 90 98 78 84 91 100 110 123 1% 0% 1% 2% 3% 4% 5% 6% 139 108 89 84 80 79 76 73 70 66 64 61 59 59 57 55 Section 2: GMMs (Midyear) Constant Growth Rate g 7% 160 120 97 92 87 85 81 78 75 70 68 65 63 62 60 58 8% 188 135 106 100 94 93 88 84 81 75 72 69 66 66 63 61 Mkt Cap
Return
$10,000,000,000 137% 1,000,000,000 160% 100,000,000 182% 50,000,000 189% 25,000,000 196% 20,000,000 198% 10,000,000 205% 5,000,000 212% 3,000,000 217% 1,000,000 228% 500,000 235% 250,000 241% 125,000 248% 100,000 250% 50,000 257% 25,000 264% [1] Section 1 is the same as Table 54
PART ONE Business Valuation
value assumed and the value calculated are consistent Don t worry too much about the iterations, because the valuation spreadsheet that you can download from my Web site automates this process for you We will present and explain this software in 7 For example, suppose your firm plans to retain all net income for the first five years of operations The first year in which you forecast dividends (whether explicit dividends or implicit dividends in the form of excess compensation) is in Year Six, for $1 million After that you expect 6 percent growth in cash flows forever The valuation steps are as follows: 1 Assume a FMV of $1 million The GMM is 66 (Table 61, L16) 2 Multiply $1 million 66 $66 million That is the tentative FMV as of the end of Year Five for the forecast cash flows from Years Six to infinity 3 Discount five years back to present value today Note, here we do not use a midyear present value factor We discount exactly five years The present value factor at a discount rate of 228 percent (B16) is 036, ie, (1/12285) 036 We multiply $66 million 036 $24 million (rounded) 4 The calculated value is closer to an FMV of $3 million than it is to the $1 million, so we need to do one more iteration The GMM for $3 million is 70 (L15)6 Then, $1 million 70 $70 million Multiplying this by the present value factor of 036, the second iteration valuation is $25 million (rounded), which is consistent with the FMV that we assumed and the 70 GMM Thus, we can stop with a valuation of $25 million If you want to be sophisticated, you could choose a GMM of 69 This would be reasonable, since the GMM for a $24 million firm should be between the 66 GMM for $1 million firms and the 70 for $3 million firms, and closer to the GMM of 70 of the $3 million firms

