Business Valuation & Corporate Finance

The value of a company or an investment project depends not on past profit but on the cash it will generate in future. Valuation discounts that future to today to give a price range; it is a basic reference in partnership, acquisition and investment decisions.

Which tool for which question?

• Weighted Average Cost of Capital (WACC) Calculator: Enter equity and debt values, their costs and the tax rate to get the weighted average cost of capital (WACC), the capital weights and the after-tax cost of debt.
• Internal Rate of Return (IRR) Calculator: Calculate the Internal Rate of Return (IRR), net cash flow and the net present value (NPV) at a discount rate of your choice from the initial investment and periodic cash flows.
• Net Present Value (NPV) Calculator: Discount the future cash flows of an investment or project to get its net present value (NPV), the total present value and the profitability index.
• EBITDA Calculator: Gross Profit, Operating Profit and Net Margin: Starting from gross sales, calculates net sales, gross profit, operating profit (EBIT), EBITDA, profit before tax and net profit, with the margin at each level, in income statement order.
• CAPM Cost of Equity Calculator (Beta and Risk Premium): Calculates the cost of equity (expected return) with the Capital Asset Pricing Model (CAPM) from the risk-free rate, beta and market risk premium; a country risk premium can be added.
• DCF Business Valuation Calculator (Discounted Cash Flow): Calculates enterprise value, equity value and value per share with the discounted cash flow (DCF) method from a 5-year free cash flow forecast, WACC and a terminal growth rate.
• Enterprise Value (EV) and Valuation Multiples Calculator: EV/EBITDA, P/E, P/B: Calculates market capitalisation, enterprise value and the EV/EBITDA, EV/Sales, P/E and P/B multiples from the share price, share count, net debt and key financials.
• Gordon Growth Model Calculator (Dividend Discount Model): Calculates the intrinsic value of a share with the Gordon growth model from the last dividend, a constant growth rate and the required return, plus the dividend yield and implied return at the market price.
• Free Cash Flow (FCF) Calculator: FCFF and FCFE: Calculates free cash flow to the firm (FCFF) and free cash flow to equity (FCFE) from operating profit, depreciation, capital expenditure and the change in working capital.

How the calculation works

The chain runs like this:

1. Cost of equity (CAPM) = risk-free rate + beta × market risk premium.
2. WACC = the average of the costs of equity and debt weighted by their shares in the capital structure (cost of debt taken after tax).
3. Free cash flow (FCFF) = cash from operations − capital expenditure.
4. DCF: flows in the explicit forecast period are discounted at WACC; for the period after, a terminal value with constant growth is added. This is enterprise value; deducting net debt gives equity value.
5. NPV and IRR apply the same logic to a project: NPV is the present value gap, and IRR is the rate that makes NPV zero.
6. The Gordon model values a mature company whose dividend grows steadily as next dividend ÷ (discount rate − growth rate).
7. Enterprise value multiples (EV/EBITDA, P/E, P/B) compare this value with similar companies.

Things to watch

• DCF is very sensitive: a one-point change in WACC or terminal growth changes the value materially; try several scenarios.
• Beta is estimated from past data and may not fully reflect the future.
• In the Gordon model growth must be below the discount rate.
• Multiples are affected by one-off items.
• Results are not investment advice.