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Questions & Answers
Q: I am an accountant and would like to try your software this could be a tool that I can benefit from.
A: You can download Excel based software for free trial directly from https://bizpep.com/businessvaluation.html . The Software and Models folder (top left) includes other titles that maybe of interest. We also have browser based versions available at https://bizpep.com/businessanalysis.html .
Question and Answer Item 2058254 - Browse All Question and Answer Items
Q: Is there a discounted cash flow model available to analyze a potential acquisition?
A: For a time frame of 3 years Net Present Value provides little additional benefit and results in negligible change, as the time frame increases it becomes increasingly relevant. However applying Net Present Value increases the complexity of calculations and tends to make them less intuitive. Therefore base valuations are calculated using the average forecast returns without discounting future cash flows. FYI we have released a browser based valuation model that applies discounted cash flow to determine NPV over extended time frames it is based on the same methodology as the Business Valuation Model and can be assessed from https://bizpep.com/businessanalysis.html . Additional detail on Discounted Cash Flow and Net Present Value can be found at https://bizpep.com/businessanalysis.html .
Question and Answer Item 2058245 - Browse All Question and Answer Items
Q: I would like to know the formula for the Other Investment in Business. My Owner Cash Flow is $3.3mil and the other investment in business value is at $9.9mil. Where is the operating capital and goodwill coming from? Thanks!
A: The Total Investment in the business and calculated Expected Valuation is the sum of Replacement Value of Business Assets, Market Value of Property, and Other Investment in Business. Or conversely the Other Investment in Business = Expected Valuation (as calculated based on return and required return on investment %) less Replacement Value of Assets less Value of Property. Basically this is saying that at the Expected Valuation there is an amount paid that is not covered by hard assets ie goodwill and other capital investment and this is the other investment in business. This value is automatically adjusted in line with the valuation. This is outlined in the mouseover comments for the the Other Investment cell. Hope this helps.
Question and Answer Item 2058244 - Browse All Question and Answer Items
Q: Ahh I see -- But I am trying to see what the business is worth to me as an owner to buyout my partner.
A: It is still the same lets say you have $100,000 you can put it in the bank and get x% or invest in the business and get y% unless y is greater than x then you are better of putting your money in the bank ie less risk plus the value of y needs to be higher the higher the business risk. So you are attempting to determine the future business return/profit and then apply a required rate of return % that allows for the business risk. If you believe the business future returns will be greater this is reflected in the Relative indicators ie if the Market is growing then increase the Market Strength indicator and the profit goes up ... or if you think you can make operational improvements (these should be quantified) then increase the Business Market Position indicator. This provides expected outcomes to which you can then apply sensitivity analysis to determine the possible valuation range.
Question and Answer Item 2058240 - Browse All Question and Answer Items
Q: When I enter the inventory amount in Material and Supplies - the higher I go with this number the lower the equity goes - which does not make sense to me.
A: That is correct. As Material and Supplies costs increase profit decreases (assuming everything else is constant) so to achieve the required Return on Investment the Valuation (and Equity) decreases. This is basically saying the lower the profit the lower the value.
Question and Answer Item 2058238 - Browse All Question and Answer Items