Financial Modeling and Valuation: A Practical Guide to Investment Banking and Private Equity

455 Pages·2013·15.56 MB·English

by  Paul Pignataro

Contents
Cover
Series
Title Page
Copyright Page
Dedication
Preface
THE WALMART CASE STUDY
HOW THIS BOOK IS STRUCTURED
Part One: Financial Statements and Projections
Chapter 1: The Income Statement
REVENUE
COST OF GOODS SOLD
OPERATING EXPENSES
OTHER INCOME
DEPRECIATION AND AMORTIZATION
INTEREST
TAXES
NON-RECURRING AND EXTRAORDINARY ITEMS
DISTRIBUTIONS
SHARES
WALMART’S INCOME STATEMENT
INCOME STATEMENT—MAKING PROJECTIONS
Chapter 2: The Cash Flow Statement
CASH FROM OPERATING ACTIVITIES
CASH FROM INVESTING ACTIVITIES
CASH FROM FINANCING ACTIVITIES
WALMART’S CASH FLOW STATEMENT
CASH FLOW STATEMENT’MAKING PROJECTIONS
Chapter 3: Depreciation Schedule
STRAIGHT LINE DEPRECIATION
ACCELERATED DEPRECIATION
DEFERRED TAXES
PROJECTING DEPRECIATION
Chapter 4: Working Capital
OPERATING WORKING CAPITAL
WALMART’S OPERATING WORKING CAPITAL
PROJECTING OPERATING WORKING CAPITAL
OPERATING WORKING CAPITAL AND THE CASH
FLOW STATEMENT
Chapter 5: The Balance Sheet
ASSETS
LIABILITIES
WALMART’S BALANCE SHEET
BALANCE SHEET PROJECTIONS
BALANCING AN UNBALANCED BALANCE SHEET
Chapter 6: The Debt Schedule, Circular References, and
Finalizing the Model
DEBT SCHEDULE STRUCTURE
MODELING THE DEBT SCHEDULE
CIRCULAR REFERENCES
AUTOMATIC DEBT PAYDOWNS
BASIC SWITCHES
FINALIZING THE MODEL
Part Two: Valuation
Chapter 7: What Is Value?
BOOK VALUE
MARKET VALUE
ENTERPRISE VALUE
MULTIPLES
THREE CORE METHODS OF VALUATION
Chapter 8: Discounted Cash Flow Analysis
MID-YEAR VS. END-OF-YEAR CONVENTION
UNLEVERED FREE CASH FLOW
WEIGHTED AVERAGE COST OF CAPITAL (WACC)
BETA
TERMINAL VALUE
WALMART DCF ANALYSIS
Chapter 9: Comparable Company Analysis
LAST TWELVE MONTHS (LTM)
CALENDARIZATION
COSTCO AS A COMPARABLE COMPANY
Chapter 10: Precedent Transactons Analysis
IDENTIFYING PRECEDENT TRANSACTIONS
WALMART PRECEDENT TRANSACTION ANALYSIS
Chapter 11: Conclusion
52-WEEK HIGH/LOW
COMPARABLE COMPANY ANALYSIS
PRECEDENT TRANSACTIONS
DISCOUNTED CASH FLOW
Appendix 1: Model Quick Steps
Appendix 2: Financial Statement Flows
INCOME STATEMENT TO CASH FLOW
CASH FLOW TO BALANCE SHEET
Appendix 3: Excel Hotkeys
About the Author
About the Companion Web Site
Index
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Cover Image: © Getty Images/Chad Baker
Copyright © 2013 by Paul Pignataro. All rights reserved.
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Library of Congress Cataloging-in-Publication Data:
Pignataro, Paul.
Investment banking in practice: financial modeling and valuation / Paul
Pignataro.
pages cm. — (Wiley finance series)
Includes bibliographical references and index.
ISBN 978-1-118-55876-8 (cloth) — ISBN 978-1-118-55874-4 (ePDF) —
ISBN 978-1-118-55872-0 (Mobi) —ISBN 978-1-118-55869-0 (ePub)
1. Investment banking. I. Title.
HG4534.P54 2013
332.66 — dc23
2012050850
This book is dedicated to every investor in the pursuit of enhancing his or
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struggle has confounded the minds of many. This book should be one
small tool to help further said endeavor; and if successful, the seed planted
to spawn a future of more informed investors and smarter markets.