Bernhard Schwetzler QoD #7: Gordon-Shapiro model or value driver model for terminal value caclulation?
This video introduces the "value driver model" as an extension of the Gordon-Shapiro (GS) model for terminal value calculation. It discusses advantages and problems when comparing it against the GS model.
Bernhard Schwetzler QoD #6: Does the Gordon-Shapiro growth model fully capture inflation?
This video discusses the relation between growth and inflation. It is shown that under consistent nominal valuation there is no need to "add" an additional growth factor caused by inflation. Also a recent critique on the Gordon-Shapiro model is discussed and rejected.
Bernhard Schwetzler QoD #5: Are there sanity checks for the growth assumptions in the terminal value calculation?
The assumption about the permanent growth rate in the terminal value calculation is a standard battlefield in transaction negotiations. This video is first introducing the so called Gordon-Shapiro model for terminal value calculation and then shows that it is a powerful tool to check for reasonable growth assumptions and to sort out unreasonable ones. (Sorry for this video being so long; if you already know the Gordon-Shapiro model and are only interested in the sanity check you may jump to 16:40..)
Bernhard Schwetzler QoD #4: Are pension reserves part of the equity bridge in DCF valuation? Including (unfunded) internal pension liabilities into DCF valuation not trivial. This video discusses potential pitfalls and shows consistent treatments of pension reserves in corporate valuation with respect to Free Cash flow, WACC and Net Debt.
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Bernhard Schwetzler QoD #3: Cost of capital of pension reserves
In Germany firms are allowed to keep pension liabilities for their employees and pensioneers (and the corresponding assets) on their own books. For some big firms these liabilities make up a billions absolute amount and a significant fraction of the firm´s balance sheet. This video tackles the question of the cost of capital of this funding source. There are significant differences in the approaches to estimate these cost and the results they deliver. The video shows that these differences are due to different (implied) assumptions on the substitution of cash wage by the annual service cost of the pension liability. You may use the pension´s interest cost shown in the P&L only, if you assume that the service cost are 100% substituting cash wage.
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