Bootstrapping And EPS post merger
I am having trouble understanding why the EPS of the acquirer would go up following an acquisition?I get it that the acquirer P/E ratio must be greater than P/E of the target company for the bootstrap...
View ArticleROIC & FCF - start with EBIT or EBITA
The book McKinsey’s Valuation defines NOPLAT/NOPAT as EBITA - actual taxes. It then uses NOPLAT/NOPAT to calculate FCF & ROIC. Mauboussin’s book Expectations Investing calculates NOPLAT/NOPAT as...
View ArticleCDS Value vs Price
Hi,In the reading on CDS, the CFAI book says that an increase in credit spread will increase the price of a CDS. Wouldn’t it only increase the value of the CDS assuming that the investor is short...
View ArticleMcKinsey's Valuation: Capitalized Software Ambiguity
Page 178. McKinsey’s Valuation 6th edition Some companies, such as UPS, have significant investments in software. Under certain restrictions, these investments can be capitalized on the balance sheet...
View ArticleReconcilliation of Permanent Tax Differences between GAAP & IRS
When there are temporary differences between Book Taxes & Actual Taxes, then DTA/DTLs are created to reconcile these.However, DTAs & DTLs are not created for permanent tax differences. So how...
View ArticleWhat to read / practise for CFA level II please?
Hi all,Sorry I am so new to the forum and I do not know how to navigate around yet.I just registered for CFA level II. Wondering any advice what are the materials I need to read for the test? Is the...
View ArticleActual default probability
“Actual default probabilities do not include the default risk premium associated with the uncertainty in the timing of the possible default loss.”Can anyone explain what this means? I vaguely remember...
View ArticleI need help with quant
I have been reading quant but to be truthfully, I don’t understand anything in it.Please who can suggest the material I can read to properly understand.
View ArticleWACC. DETERMINING WACC
Hi, Could anybody tell me why D/E = 0.25 it is the equivalent of D/V = 0.25/1.25 ?I´m doing an excercise of getting the rwacc ( D/V rd (1-T) + E/V re). and in the solutions appears the equivalency...
View ArticlePM - Using multifactor Model EOC question
Hi, Could someone please help me understand the EOC question number 9 in Reading 44, I thought the answer was B but as per the curriculum the answer is C and I am unable to comprehend this, help me...
View ArticleBasis trade - CDS arbitrage
Afaik, a true arbitrage profit opportunity must have 0 initial net cash outlay. According to my CFA materials, with a basis trade, say if the credit spread in the bond market is higher than the CDS...
View ArticleAdjusting Cash Flow - Contributions to Pension Plan
Hi Folks,“Excess contribution (over total pension cost) to the pension plan by employer is similar to repayment of borrowing and would increase cash outflow from financing activities and increase cash...
View ArticleNOPAT- Add back the depreciation expense?
Hi there,NOPAT is EBIT (1-t). Do we need to add back the depreciation expense since we removed it to come up with the actual value of the operating cash flows after tax?Thanks!
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DCF - how to consider investments?
Hi everyone,It seems that I forgot all that I knew some years ago :( fortunately, you guys are here to help I have to model a quite simple (and overly simplistic) project: the company starts operations...
View ArticleWhy is an adjustment necessary for Minority Interest while calculating ROIC?
This is from Mauboussin’s article on calculating ROIC https://plus.credit-suisse.com/rpc4/ravDocView?docid=P8BJ3Y Page 10 An adjustment for minority interest is relevant either when another company...
View ArticleCVA and risk free rate
Hello there,Just a quick clarification. When we calculate the present value of the expected losses, why are we using the risk free rate to discount the cash flows and not a rate that is adjusted for...
View ArticleNPV . Help me to find NPV
Hi ,I´m getting a wrong result from my calculation of this NPV = 125000 + 47000/ (1.1)4 + 20.000 /(1.1)4 = 37644CFO = - 125000 ; C01 = 47000 ; SAVAGE VALUE = 20000; T = 4, I= 10In my BAII I´m...
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