Multi-Stage Growth Assumptions

These configure the Multi-Stage Growth worksheets. See Working with Assumptions.

Earnings Base

Determines the economic base that is projected and discounted. Configures the Benefit Stream worksheet. EBT is earnings before taxes, EBIT is earnings before interest and taxes, and EBITDA is earnings before interest, taxes, depreciation and amortization.

Historic or Adjusted Base

Selects the historic or adjusted financials to use as the base.

Debt Free (Invested Capital)

Adds interest expense back to the benefit stream, applies weighted average cost of capital (WACC) to the discount rate, and deducts debt from the indicated value.

Projection Method

Selects the method for projecting the benefit stream into the future.

wExplanations of Methods

Percentage Growth

Grows the benefit stream at a different rate for each year.

Two Stage Gordon Growth

Grows the benefit stream over the projected years at a single rate (Stage 1), then applies the long term sustainable growth to calculate the terminal value (Stage 2).

Three Stage Gordon Growth

Grows the benefit stream over the projected years at one rate for a given number of years (Stage 1), at a second rate over the remaining years in the projection period (Stage 2), then applies the long term sustainable growth to calculate the terminal value (Stage 3).

Dollar Growth

Manually enter the benefit stream for each year of the forecast period.

Historic Growth

Projects the benefit stream using the compound annual growth rate from the business's historical data. You can overwrite the growth rate in the Projection Method worksheet.

Regression

Uses a regression analysis on the historic data to project the benefit stream.

Forecast Period

Sets the number of years to project the benefit stream.

Rate Calculation Method

Determines how the discount rate is calculated. ValuSource Pro supports two calculation methods, the Buildup Method and the Capital Asset Pricing Model (CAPM).

SBBI or D&P

Hides or shows the appropriate rows to match the equity risk premium data set. See SBBI and Duff and Phelps.

Which D&P Type

Enabled when the SBBI or D&P assumption (see above) is set to D&P Decile. Determines the rate type to apply from the Duff & Phelps data set: Excess of CAPM, or Arithmetic Mean.

Which D&P Size

Enabled when the SBBI or D&P assumption (see above) is set to D&P Decile. Determines the decile applied from the Duff & Phelps data set.

Midyear Convention

Discounts the cash flows from the middle of the year. The mid-year cash flow is estimated by averaging the cash flows from the preceding year and the current year.

Industry Risk

Applies a risk premium for the industry to the discount rate. You can download the risk premium from our SBBI Database.

Level of Control

Applies a premium for control or a discount for lack of control in the indicated value calculation. The premium and discount are calculated in the Level of Control (Premium or Discount) worksheet. This assumption is enabled and disabled by the Application of Premiums, Discounts and Non-Operating/Excess Assets setting on the Project Assumptions sheet.

Marketability Discount

Applies a discount for lack of marketability in the indicated value calculation. The discount is calculated in the Marketability Discount worksheet. This assumption is enabled and disabled by the Application of Premiums, Discounts and Non-Operating/Excess Assets setting on the Project Assumptions sheet.

Excess/Non-Operating Assets

Includes excess and non-operating assets in the indicated value calculation. The value of the assets is calculated in the Excess and Non-Operating Assets worksheet. This assumption is enabled and disabled by the Application of Premiums, Discounts and Non-Operating/Excess Assets setting on the Project Assumptions sheet.

Level of Control for Excess/Non-Operating Assets

Applies the level of control premium or discount to the excess and non-operating assets in the indicated value calculation.

bDisabled if the Level of Control assumption is set to No Premium or Discount.

bDisabled if the Excess/Non-Operating Assets assumption is set to False.

bEnabled and disabled by the Application of Premiums, Discounts and Non-Operating/Excess Assets setting on the Project Assumptions sheet.

Marketability Discount for Excess/Non-Operating Assets

Applies the marketability discount to the excess and non-operating assets in the indicated value calculation.

bDisabled if the Marketability Discount assumption is set to False.

bDisabled if the Excess/Non-Operating Assets assumption is set to False.

bEnabled and disabled by the Application of Premiums, Discounts and Non-Operating/Excess Assets setting on the Project Assumptions sheet.

Rate Sensitivity

Determines if premiums and discounts are included in the values shown on the Rate Sensitivity worksheet.