WestminsterSystems
Financial Modelling for Business
In this example, Intrinsic Value is derived by adding
total net assets and the discounted cashflows from the model.
The valuation implies that there is a discount of 47%
between the intrinsic value of the assets and the current share price.
Terminal Value is the method used to value the project beyond the constraints of the DCF
model.
In this
example, Terminal Value is calculated using the Perpetual Growth Method.
A conservative rate is used in the calculation, that
cannot exceed the GDP rate. In this example the RFR Risk Free Rate is set
to the 10-year government bond rate of 2%.
In this
example, the Equity Valuation is derived by adding the present value of the
model’s cashflow estimate to the terminal value to give a total equity value.
The valuation implies that there is a discount of 105%
between the intrinsic value of the assets and the current share price.