Finance Tutoring with CPA, CFA PhD & MBA Tutors

Many valuation models start with EBIT. EBIT includes all kinds of income earnings and expenses before only interest and tax expenses. However, not all revenues and expenses that show up in EBIT must be valued when evaluating a business. What line items found in EBIT must be removed when preparing cash flows for a DCF? This article discusses this question in detail and gives you examples of different types of line items that you must remove from EBIT in a DCF valuation. These include incomes, expenses, nonrecurring line item, temporary items, etc.

You can use the levered or unlevered free cash flow to value a company using the DCF method of valuation. However, there are different situations when you prefer one over the other. This article discusses three specific instances when you can use the levered free cash flow instead of the unlevered free cash flow when valuing a company using the DCF method.

You can use the levered or unlevered free cash flow to value a company using the DCF method of valuation. However, there are different situations when you prefer one over the other. This article discusses three specific instances when you should use the unlevered free cash flow instead of the levered free cash flow when valuing a company using the DCF method.

Why/When do you use unlevered FCF when valuing a company using the DCF method?

Valuation using multiples is a popular and frequently used valuation method. We address if valuation using multiples is based on sound corporate finance principles in this article. While valuation using multiples is a popular and frequently used valuation method, it is also misused and incorrectly applied frequently! We address the misuse or incorrect application of valuation using multiples in another article and only address the technique’s underlying corporate finance principles here.

There are three methods that are used in valuation: DCF, multiples and, options-based method. Each one has its pros and costs. However, the DCF method is the most used in valuation in the classroom. In this article, we address the question “Why is the DCF valuation method the most used method in valuation?”

(Note: we acknowledge that there is a debate on the most used valuation technique in practice vs. in the classroom. The multiples method maybe more frequently applied in practice as it is far simpler!)

All kinds of businesses can be valued using the DCF valuation. However, not all companies are ideally suited for a DCF valuation. Some companies are ideally suited for DCF valuation. While some other companies are better valued using other valuation techniques such as multiples-based valuation or options-based valuation. In this article, we discuss which types of companies are ideally suited for valuation using the DCV valuation method.

This post covers the primary factors that determine the length of your forecast in a DCF valuation model. We discuss four factors you should consider when determining how many years you forecast your cash flows in detail in this article.

An MBA student electing a private equity or venture capital course will encounter building an investment cash flow waterfall for the private equity or venture capital investors. Our finance tutors can assist you understand investment returns and the investment distribution waterfall structure. We outline the key building blocks and steps to build a private equity or venture capital investment cash flow distribution waterfall.

The Black-Scholes options valuation method is the best way to value options but learning to value options using the replicating portfolio approach, risk-neutral approach and the binomial tree approach help students get the intuition behind option valuation.