Private Equity Project: Calculating Unlevered FCF and Herfindahl Index
Learn how to calculate Unlevered Free Cash Flow (FCF) and Herfindahl Index for your private equity project. Understand the importance of financial data, instructions, and finding industry competitors. Obtain necessary information for analyzing cash flows and making informed investment decisions.
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Presentation Transcript
Private Equity Project Part 1
Instructions Calculating cash flows Income statement includes the information that we need to calculate cash flows or the net cash in the hands of the corporation after paying all expenses, taxes, and capital expenditures. This is the cash available to investors (both equity and debt investors): CF = Sales Operating Expenses Taxes capital expenditures change in NWC Operating Expenses = COGS + SG&A+R&D Taxes = (Sales Operating Expenses Depreciation)x (Tax Rate) CF = [Sales x Operating margin Dep.](1-Tax Rate) + Dep. CapEX Change in NWC
Instructions Issues to notice NWC = Inventory + Receivables Payables + Cash Or use Current Assets Current Liabilities Cash used for operations Firms also hold liquid assets or excess cash to finance future investments. Why deduct the change in NWC? CF = [Sales x Operating margin Dep.](1-Tax Rate) + Dep. CapEX Change in NWC
Financial Data (back 10 years) Company s website Yahoo or Google finance sec.gov Go to sec.gov FILINGS Company Filings search by company ticker or name 10-K (interactive data or the documents themselves)
Finding Competitors of CAT Morningstar is a good source of information about industry peers
$39.89B $24.18B $84.25B $18.24B $26.6 B
