PL EN


2010 | Special Issue | 15-27
Article title

VALUATION OF EMCINSMED PLC. – HOW DOES A COST OF CAPITAL THAT TRACKS CAPITAL STRUCTURE INFLUENCES THE VALUE OF A COMPANY? (Zastosowanie technik iteracyjnych w wycenie przedsiebiorstwa – wycena EMCINSMED S.A.)

Authors
Title variants
Languages of publication
PL
Abstracts
EN
DCF is the most respected method of company valuation. However, it does have a flaw related to the fact that the weights (share of debt and equity in total financing) that are used are based on book values. The problem may be overcome by using a technique based on iterations. In a real-life case, when one has to deal with numerous parameters and time periods, a numerical solution seems to be the only feasible approach. It is a chain of formulae that becomes so integrated that the information between cash flows and cost of capital moves freely. Loops run along columns (from V to WACC, and from E to k) and lines (from one year to another). The cost of capital 'tracks' the capital structure and changes accordingly. The valuation is recursive, going backwards in time. In general, the recursive method of company evaluation overcomes a fundamental problem that is often ignored by many other methods: the fact that the cost of capital depends on the financial structure. Here in the paper, the valuation of Emcinsmed plc. company is done in order to present the i-DCF valuation method. The company is highly leveraged, hence it serves as a good example.
Year
Volume
Pages
15-27
Physical description
Document type
ARTICLE
Contributors
author
  • Dr Wiktor Patena, Wyzsza Szkola Biznesu – National-Louis University, ul. Zielona 27, 33-300 Nowy Sacz, Poland
References
Document Type
Publication order reference
Identifiers
CEJSH db identifier
10PLAAAA08952
YADDA identifier
bwmeta1.element.20bcca93-2b35-3f86-9bc4-55bda8cd4e05
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