Hi all,
I was hoping someone would have 2 minutes of their expertise to help me out on a query.
In relation to Enterprise Value based on DCF analysis I understand that in general this figure should be adjusted by Net Debt including Finance leases to get to final Equity Value. However, the company in question in this valuation uses the assets accounted for under finance lease in its general day to day operations and the principal element of the lease payments have therefore been accounted for in the Working Capital within the Cashflows. The view among the Valuation team is that we would therefore be double counting the Lease payments if we were to adjust the Enterprise Value by the Finance Lease amount for the DCF analysis. I largely agree with this although feel that we may be missing something in this regard (in terms of the interest payments on the leases being excluded?). Any views on this would be greatly appreciated, Would it be more correct to leave out any lease liabilities from working capital an dmake a full adjustment for finance leases at the end of the Enterprise Value calculation?
Also in terms of the multiple valuation we are using a EV/EBITDA multiple from publicly listed companies in a similar sector . My understanding is that this multiple is indicative of unleveraged future cashflows of a business. Is it correct for this (e.g 7.0x) multiple to be applied to our EBITDA with no adjustment or should there be an adjustment here to reflect the finance leases? Any help/views on the above would be greatly appreciated.....Thanks so much, Siobhan
I was hoping someone would have 2 minutes of their expertise to help me out on a query.
In relation to Enterprise Value based on DCF analysis I understand that in general this figure should be adjusted by Net Debt including Finance leases to get to final Equity Value. However, the company in question in this valuation uses the assets accounted for under finance lease in its general day to day operations and the principal element of the lease payments have therefore been accounted for in the Working Capital within the Cashflows. The view among the Valuation team is that we would therefore be double counting the Lease payments if we were to adjust the Enterprise Value by the Finance Lease amount for the DCF analysis. I largely agree with this although feel that we may be missing something in this regard (in terms of the interest payments on the leases being excluded?). Any views on this would be greatly appreciated, Would it be more correct to leave out any lease liabilities from working capital an dmake a full adjustment for finance leases at the end of the Enterprise Value calculation?
Also in terms of the multiple valuation we are using a EV/EBITDA multiple from publicly listed companies in a similar sector . My understanding is that this multiple is indicative of unleveraged future cashflows of a business. Is it correct for this (e.g 7.0x) multiple to be applied to our EBITDA with no adjustment or should there be an adjustment here to reflect the finance leases? Any help/views on the above would be greatly appreciated.....Thanks so much, Siobhan