This will enable us to get a feel for the job.  We will then come back to you and ask for more  information.  Using this information we will populate our valuation model and return to you by email certain outputs from this model.

These outputs will include basic background calculations along with a number of tables that can be inserted into your valuation report.  Once you have received the initial output, you will likely come back to us with some suggested “changes” based on your own knowledge of the business and the circumstances surrounding the valuation itself.  This is to a large extent the “Art” part of the valuation.

In addition to a basic capitalisation of earnings approach, it is possible, with the provision of additional information to expand this into a business forecast which forecasts P & L and balance sheet for up to 10 years and a DCF module which will provide present value calculations of free cash flows to both equity and debt holders.

Expenses are entered into a separate input sheet. YTD data is extrapolated to represent current year forecast which can be manually adjusted for seasonal variation.

Expenses are classified and analysed (automatically) into:

• Identifiable abnormal or non-recurring expenses;
• Fixed expenses; and
• Variable expenses.

This analysis is used in the Earnings Valuation module (for normalisation purposes) and the Business Forecast module for forecasting future levels of expense.

The financial position (Balance Sheet) of the entity is entered for the same years as for performance data including the Entity’s current position YTD. The valuer can choose to use the position at either last balance date or YTD for valuation purposes.

The model provides for adjustments to be made to reported values to reflect current market values and dissects the “Balance Sheet” into:

• Normalised Tangible Operating Assets;
• Surplus Assets; and
• Debt.

ValModel calculates the minimum cash required to meet cash expenses including rent and wages. This can be over-ridden.

ValModel separates “Land and Buildings” from other assets for valuation purposes. If the intention is to carry on to utilise the 2nd and 3rd modules, then a full analysis and reconciliation of “Fixed Assets” is required to provide:

• Cost;
• Acquisitions and disposals in each year; and
• Accumulated depreciation.

A separate worksheet provides a facility to analyse and normalise working capital.

Balance Sheet Outputs Include
a summary of net debt;
historic cash flow; and
changes in working capital.

ValModel relies on a Modified Capital Asset Pricing Model (CAPM) to estimate the Cost of Capital by expanding the traditional CAPM formula to include “size effect” and “company specific” factors of risk.

Data to be input includes:

• Existing borrowing facilities and interest rates;
• Current “Risk Free Rates” [these are automatically input];
• Current tax rates;
• Data on Comparable Company Betas;
• Optimum debt to equity ratio for normalising WACC;
• Size effect of risk; and
• Company Specific factors of risk including:
  – Unlisted;
  – Marketability;
  – Industry risk not fully reflected in the Beta;
  – Dependence on key personnel, customers and/or suppliers;
  – Volatility in earnings;
  – Low Net Tangible assets;
  – Higher or lower leveraging; and
  – Other factors including pending competition or legislative changes.