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Post 3 - Why does the conventional DCF not work for valuing a start-up/young firm?

Wizenius

Diversity in equity claims: In most of the cases of publicly traded firms with one class of shares, all equity claims on the firm are equivalent.

DCF 52
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Growth Equity: The Child Prodigy of Private Equity and Venture Capital, or an Artifact of Easy Money?

Mergers and Inquisitions

Over the past few decades, growth equity (GE) has gone from an afterthought to a major asset class for huge investment firms. Some argue that GE offers the best of both worlds: the opportunity to fund innovation and growth – as in venture capital – plus the ability to limit downside risk and invest in proven companies – as in private equity.

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Post 4 - Why does the conventional DCF not work for valuing a start-up/young firm?

Wizenius

This discounting factor is targeted rate of return of the VC investor and is set high enough to capture the foreseen/perceived risk of operating the business and chances of its survival. The discounting factor would be typically more compared to the one used in publicly traded firms.

DCF 52
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Understanding the Impact of Interest Rates on Private Equity and Business Valuations

Focus Investment Banking

One aspect that is often talked about and significantly impacts the business landscape is the relationship between interest rates, private equity groups, and business valuations. For private equity (PE) groups, these rates determine the cost of capital, which is essential for their investment strategies.

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The Full Guide to Healthcare Private Equity, from Careers to Contradictions

Mergers and Inquisitions

When you hear the words “healthcare private equity,” two thoughts probably come to mind: Wait a minute, isn’t healthcare a risky/growth-oriented sector? Before delving into these nuances, we should take a step back and define the sector: Definitions: What is a Healthcare Private Equity Firm? Why do PE firms operate there?

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M&A Blog #16 – valuation (Discounted Cash Flow)

Francine Way

As I mentioned in my last post, Discounted Cash Flow (DCF) is a valuation method that uses free cash flow projections, a discount rate, and a growth rate to find the present value estimate of a potential investment. The major steps of DCF are: Identify extraordinary, unusual, non-recurring items from the target’s 10-Ks and 10-Qs.

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The Dividend Discount Model (DDM): The Black Sheep of Valuation?

Mergers and Inquisitions

It can be useful for certain companies, such as power and utility firms and midstream (pipeline) operators in oil & gas … …but it’s also much harder to set up and use than a standard DCF. And Equity Real Estate Investment Trusts (REITs) must distribute almost all their Net Income, so the DDM can work well in REIT valuations.