Principles of Finance · free preview
The Complete Forecast and the Value of Growth
The complete forecast assembles sales, pro forma statements, and cash flows into a funding plan, and the same machinery values growth by discounting projected free cash flows, separating the value of existing operations from the value growth adds.
1. Assembling the forecast
Assembling the forecast
2. The funding story
The funding story
3. Valuing growth
Valuing growth
4. The forecasting module closed
The forecasting module closed
5. The assembly's artifacts
What three artifacts does a complete financial forecast deliver?
6. Reading a rising plug
A forecast's debt plug rises through year two, peaks, then declines. What story is the model telling?
7. Scenario-colored funding
Why should the funding plan read the scenario range rather than the base case alone?
8. The growth decomposition
How does the valuation exercise decompose the firm's worth into existing operations and growth?
9. When growth adds value
Growth adds value to a firm under what condition?
10. The module's disciplines assembled
Which list names the forecasting module's working disciplines?
11. The no-growth path
In the growth valuation exercise, what two-word term names the comparison path holding cash flows at current levels? Answer in lowercase.
12. The spread that prices growth
What three-letter abbreviation names the economic value created when return exceeds the cost of capital, the spread that decides whether growth adds value? Write the abbreviation.
13. The peak funding point
What two-word term names the point in the funding path where the debt plug reaches its maximum? Answer in lowercase.
14. The value decomposition's output
The growth valuation exercise reports what share of firm value comes from growth. What one-word term names that share? Answer in lowercase.
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