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What are some benefits of starting with operating income rather than accounting statement net income to derive a cash flow estimate?

1. Estimating Cash Flow and Discount Rates –
The textbook (Chapter 7) discusses cash flow calculations and discount rate selection. What are your insights on using Free Cash Flow to the Firm, Free Cash Flow to Equity and selecting a discount rate to build your acquisition valuation model? What are some benefits of starting with operating income rather than accounting statement net income to derive a cash flow estimate?
2. Estimating Private Company Value –
Analysts normally must re-formulate accounting statements to begin the valuation process for private companies. Why? How might this process improve a private company valuation model? The textbook (Chapter 10) explains control premiums, discounts for liquidity and minority shares. Why is this important for the valuation process of a privately held business?

• FINC 430 Week 3 Discussions:

1. Estimating Value with Comparable Company Ratios –
The textbook (Chapter 8) discusses relative valuaton methods. Why is it difficult to value a business using relative valuation?
2. Estimating Value with Weighted Average Method –
Which scenarios favor using the Weighted Average Method to value a business?
3. Most Important Things Learned –
What are the most important things you learned from the study of this week’s readings and assignments?

Additional work below:
• Also complete Research Project – Stage 1, Stage 2, & Stage 3 (Separate Attachment)

• Quiz 1 and 2 attached as well for FINC 430


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