Free cash flow. How to calculate cash flow

Optimization of financial, production and investment processes is unthinkable without qualitative analysis. Based on the data of the studies and reports carried out, a planning process is carried out, and unfavorable factors hindering development are eliminated.

One of the types of assessment of the effectiveness of financial activity is the calculation cash flow. Formula and features of the application of this technique will be presented below.

Purpose of analysis

Cash flow formula calculated according to certain methods. The purpose of such an analysis is to determine the sources of cash inflow to the organization, as well as their expenditure to calculate the deficit or excess of money for the period under study.

To carry out such a study, the enterprise generates a cash flow statement. A corresponding estimate is also drawn up. With the help of such documents, it is possible to determine whether the available funds are sufficient for the organization of a full-fledged investment, financial activity of the company.

The conducted research allows to determine whether the organization is dependent on external sources of capital. It also analyzes the dynamics of inflow and outflow of funds in the context of each type of activity. This allows you to develop a dividend policy, to predict it in the future period. Cash flow analysis aims to determine the actual solvency of the organization, as well as its forecast in the short term.

What does the calculation give?

Cash flow, calculation formula which is presented in various methods, requires proper analysis for the possibility of effective management. In the case of the presented study, the organization gets the opportunity to maintain a balance of its financial resources in the current and planned period.

Cash flows must be synchronized in terms of their time of receipt and volume. Thanks to this, it is possible to achieve good indicators of the company's development, its financial stability. A high degree of synchronization of incoming and outgoing flows makes it possible to accelerate the execution of tasks in a strategic perspective, and reduce the need for paid (credit) sources of financing.

Financial flow management allows you to optimize the use of financial resources. The level of risk in this case is reduced. Effective management will help to avoid the insolvency of the company, increase financial stability.

Classification

There are 8 main criteria by which cash flows can be grouped into categories. Taking into account the methodology by which the calculation was made, they distinguish between gross and for the first approach it involves summing up all the cash flows of the enterprise. The second method takes into account the difference between income and expenses.

According to the scale of influence on the economic activity of the organization, the general flow for the company, as well as its components (for each division and economic operations), are distinguished.

By type of activity, production (operating), financial and investment groups are distinguished. In the direction of movement, a positive (incoming) and negative (outgoing) flow is distinguished.

Considering the sufficiency of funds, a distinction is made between excess and shortage of funds. The calculation can be made in the current or planned period. Also, flows can be classified into discrete (one-time) and regular groups. Capital can flow in and out of an organization at regular intervals or randomly.

Pure flow

One of the key indicators in the presented analysis is Net cash flow. Formula This coefficient is used in the investment analysis of activities. It gives the researcher information about the financial condition of the company, its ability to increase its market value, and attractiveness to investors.

Net cash flow is calculated as the difference between the funds received and withdrawn from the organization for a selected period of time. This is actually the sum between the indicators of financial, operating and investment activities.

Information about the size and nature of this indicator is used in making strategic decisions by the owners of the organization, investors and credit companies. At the same time, it becomes possible to calculate whether it is advisable to invest in the activities of a particular enterprise or in a prepared project. The presented coefficient is taken into account when calculating the value of the enterprise.

Flow control

Cash flow ratio, formula which is used in calculations by almost all large organizations, allows you to effectively manage financial flows. For calculations, it will be necessary to determine the amount of incoming and outgoing funds for a specified period, their main components. Also, the breakdown is performed in accordance with the type of activity that generates a certain movement of capital.

The calculation of indicators can be done in two ways. They are called indirect and direct methods. In the second case, the data of the organization's accounts are taken into account. The fundamental component for conducting such a study is the indicator of sales revenue.

The method of indirect calculation involves using for the analysis of the balance sheet items, as well as the statement of income and expenses of the enterprise. For analysts, this method is more informative. It will allow you to determine the relationship between profit in the study period and the amount of money of the enterprise. The impact of changes in balance sheet assets on the net profit indicator can also be considered using the presented methodology.

Direct settlement

If the calculation is made at a particular moment is determined current cash flow. Formula its simple enough:

NPV = NPO + NPF + NPI, where NPV - net cash flow in the study period, NPO - cash flow from operating activities, NPF - from financial transactions, NPI - in the context of investment activities.

To determine the net cash flow, you must use the formula:

NPV \u003d VDP - IDP, where IDP is the incoming flow of money, IDP is the outgoing flow of funds.

In this case, the calculation is carried out for one or more calculation periods. This is a simple formula. The components from each type of activity must be calculated separately. In this case, it is necessary to take into account all the components.

Calculation of net investment flow

The bulk of the organization's funds at the disposal of the company at the moment comes from operating cash flow. Formula calculation of the net indicator (was presented above) necessarily takes into account this value.

NPI \u003d VOS + PNA + PDFA + RA + DP - PIC + SNP - PNA - PDFA - VSA, where VOS - revenue received from the use of fixed assets, PNA - income from the sale of intangible assets, PDFA - income from the sale of long-term financial assets, RA - income from the sale of shares, DP - interest and dividends, PIC - acquired fixed assets, COP - balance of work in progress, PNA - purchase of intangible assets, PDFA - purchase of long-term financial assets, VSA - the amount of repurchased own shares.

Net Cash Flow Calculation

Cash flow formula uses data on net Calculation is carried out according to the following formula:

NPF \u003d DVF + DDKR + DKKR + BCF - VDDK - VKKD - YES, where DVF - additional external financing, DDKR - additionally attracted long-term loans, DKKR - additionally attracted short-term loans, BTF - non-repayable targeted financing, VKKD - debt payments under VKKD - payments on short-term loans, YES - dividend payments to shareholders.

indirect method

Indirect also allows you to determine the net cash flow. Balance Formula involves adjustments. For this, data on depreciation, changes in the structure and number of current liabilities and assets are used.

The calculation of net profit from operating activities is made according to the following formula:

NPO \u003d PE + AOS + ANA - DZ - Z - KZ + RF, where NP - net profit of the enterprise, AOS - depreciation of fixed assets, ANA - depreciation of intangible assets, DZ - change in receivables in the study period, Z - change in stocks, KZ - change in the amount of accounts payable, RF - change in the indicator of reserve capital.

The net cash flow is directly affected by changes in the value of the company's current liabilities and assets.

free cash flow

Some analysts use the indicator in the process of studying the financial condition of the organization free cash flow. Formula calculation of the presented indicator is considered in two main aspects. Distinguish between the free cash flow of the firm and capital.

In the first case, the indicator of the company's operating activity is considered. It subtracts investments in fixed assets. This indicator provides information to the analyst about the amount of finance that remains at the disposal of the company after investing capital in assets. The presented methodology is used by investors to determine the feasibility of financing the company's activities.

The free cash flow of capital involves subtracting from the total amount of finance of the enterprise only its own investments. This calculation is used most often by the shareholders of the company. This technique is used in the process of assessing the shareholder value of the organization.

Discounting

To compare future financial payments with the current state of the value, a discounting technique is applied. This technique takes into account that in the long term, money gradually loses its value relative to the current state of the price. Therefore, the analysis uses discounted cash flow. Formula it contains a special coefficient. It is multiplied by the amount of the cash flow. This allows you to correlate the calculation with the current level of inflation.

The discount factor is determined by the formula:

K = 1/(1 + SD)VP, where SD is the discount rate, IP is the time period.

The discount rate is one of the most important elements in the calculation. It characterizes how much income an investor will receive when investing his funds in a particular project. This indicator contains information about inflation, profitability in the context of risk-free operations, profit from increased risk. Also, the calculations take into account the refinancing rate, the cost (weighted average) of capital, deposit interest.

Optimization Approaches

When determining the financial condition of the organization, take into account discounted cash flow. Formula may not be taken into account if the indicator is given in the short term.

The process of optimizing cash flow involves establishing a balance between the company's expenses and income. Scarcity and surplus negatively affect the financial condition and stability of the organization.

When there is a shortage of funds, liquidity ratios decrease. Solvency also becomes low. An excess of funds entails the actual depreciation of temporarily idle funds due to inflation. Therefore, the company's management must balance the amount of incoming and outgoing flows.

Considering what is cash flow formula its definition, it is possible to make decisions on optimizing this indicator.

The main goal of any business is to make a profit. In the future, the profit indicator is reflected in a special tax report on financial results - it is he who indicates how efficient the operation of the enterprise is. However, in reality, profit only partially reflects the results of the company's work and may not at all give an idea of ​​​​how much money the business actually earns. Full information on this issue can only be found in the cash flow statement.

Net profit cannot reflect the funds received in real terms - the amounts on paper and the company's bank account are two different things. For the most part, the data in the report is not always factual and is often purely nominal. For example, exchange rate revaluation or depreciation does not bring real money, and funds for the goods sold appear as profit, even if the money has not yet been actually received from the buyer of the goods.

It is also important that the company spends part of the profit on financing current activities, namely the construction of new factory buildings, workshops, retail outlets - in some cases, such expenses significantly exceed the company's net profit. As a result of all this, the overall picture can be quite favorable and the company can be quite successful in terms of net profit - but in fact the company will suffer serious losses and not receive the profit that is indicated on paper.

Free cash flow helps to correctly assess the company's profitability and assess the real level of earnings (and also better assess the possibilities of a future investor). Cash flow can be defined as the funds available to a company after all due expenses have been paid, or as funds that can be withdrawn from a business without harming the latter. You can get data for calculating cash flows from the company's report under RAS or IFRS.

Types of cash flows

There are three types of cash flows, and each option has its own characteristics and calculation procedure. Free cash flow is:

from operating activities - shows the amount of money that the company receives from the main activity. This indicator includes: depreciation (with a minus sign, although funds are not actually spent), changes in receivables and credits, as well as inventory - and in addition other liabilities and assets, if any. The result is usually displayed in the column "Net cash from core / operating activities". Legend: Cash Flow from operating activities, CFO or Operating Cash Flow, OCF. In addition, the same value is also simply referred to as Cash Flow;


from investment activity - illustrates the cash flow aimed at the development and maintenance of current activities. For example, this includes the modernization / purchase of equipment, workshops or buildings - therefore, for example, banks usually do not have this item. In English, this column is usually called Capital Expenditures (capital expenditures, CAPEX), and investments can include not only investments “in themselves”, but also be aimed at buying assets of other companies, such as stocks or bonds. Referred to as Cash Flows from investing activities, CFI;


from financial activities - allows you to analyze the turnover of financial receipts for all operations, such as receiving or returning debt, paying dividends, issuing or repurchasing shares. Those. this column reflects the conduct of business by the company. A negative value for debts (Net Borrowings) means their repayment by the company, a negative value for shares (Sale/Purchase of Stock) means they are bought. Both characterize the company in a good way. In foreign reporting: Cash Flows from financing activities, CFF

Separately, you can stop at promotions. How is their value determined? Through three components: depending on their number, the company's real profit and market sentiment in relation to it. An additional issue of shares leads to a drop in the price of each of them, since there are more shares, and the company's results during the issue most likely did not change or changed slightly. And vice versa - if the company buys back its shares, then their value will be distributed among the new (smaller) number of securities and the price of each of them will rise. Conventionally, if there were 100,000 shares at a price of $50 each and the company bought back 10,000, then the remaining 90,000 shares should be worth approximately $55.5. But the market is the market - the revaluation may not occur immediately or by other values ​​(for example, an article in a major publication about such a company's policy can cause its shares to grow by tens of percent).

The debt situation is ambiguous. On the one hand, it is good when a company reduces its debt. On the other hand, properly spent credit funds can take the company to a new level - the main thing is that there are not too many debts. For example, the well-known company Magnit, which has been actively growing for several years in a row, only turned positive free cash flow in 2014. The reason is development through loans. Perhaps, during the study, it is worth choosing for yourself some kind of maximum debt limit, when the risks of bankruptcy begin to outweigh the risk of successful development.

When summing all three indicators, a net cash flow . Those. This is the difference between the inflow (receipt) of money into the company and their outflow (expenditure) in a certain period. If we are talking about negative free cash flow, then it is indicated in brackets and indicates that the company is losing money, not earning it. At the same time, to clarify the dynamics, it is better to compare the company's annual rather than quarterly indicators in order to avoid the seasonal factor.

How are cash flows used to value companies?

To form an impression of a company, it is not necessary to count Net Cash Flow. The amount of free cash flow also allows you to evaluate the business using two approaches:

• based on the value of the company, taking into account own and borrowed (loan) capital;

• including only equity capital.

In the first case, all cash flows reproduced by existing sources of borrowed or own funds are discounted. In this case, the discount rate is taken as the cost of capital involved (WACC).

The second option provides for the calculation of the value of not the entire company, but only a small part of it - equity. For this purpose, the equity of the FCFE is discounted after all debts of the company have been paid. Let's consider these approaches in more detail.

Free cash flow to equity - FCFE

FCFE (free cash flow to equity) is a designation of the amount of money left from the profit received after paying taxes, all debts and expenses for the operating activities of the enterprise. The calculation of the indicator is carried out taking into account the net profit of the enterprise (Net Income), depreciation is added to this figure. After that, capital costs (arising in connection with the modernization and / or purchase of new equipment) are deducted. The final formula for calculating the indicator, determined after the payment of loans and loans, is as follows:

FCFE = Net cash flow from operating activities – Capital expenditures – Loan repayments + New loan origination

Free cash flow of the firm - FCFF

FCFF (free cash flow to firm) refers to the funds that remain after paying taxes and deducting capital expenditures, but before making payments on interest and total debt. To calculate the indicator, you must use the formula:

FCFF = Net cash flow from operating activities - Capital expenditures

Therefore, FCFF, unlike FCFE, is calculated without taking into account all loans and loans issued. This is what is usually meant by free cash flow (Free Cash Flow, FCF). As we have noted, cash flows may well be negative.

Example of cash flow calculation

In order to independently calculate cash flows for a company, you need to use its financial statements. For example, Gazprom has it here: http://www.gazprom.ru/investors. We follow the link and select the sub-item “all reporting” at the bottom of the page, where you can see reports from 1998. We find the desired year (let it be 2016) and go to the section "Consolidated IFRS financial statements". Below is an excerpt from the report:

1. Calculate the free cash flow to capital.

FCFE = 1,571,323 - 1,369,052 - 653,092 - 110,291 + 548,623 + 124,783 = 112,294 million rubles remained at the disposal of the company after paying taxes, all debts and capital expenditures (expenses).

2. Determine the free cash flow of the firm.

FCFF = 1,571,323 - 1,369,052 = 202,271 million rubles - this figure shows the amount net of taxes and capital expenditures, but before interest and total debt payments.

P.S. In the case of US companies, all data can usually be found at https://finance.yahoo.com. For example, here is the data of Yahoo itself in the Financials tab:

Conclusion

In general terms, cash flow can be understood as free funds of the company and it can be calculated both with and without debt and loan capital. A company's positive cash flow is indicative of a profitable business, especially if it grows from year to year. Nevertheless, any growth cannot be infinite and rests against natural limitations. In turn, even stable companies (Lenta, Magnit) can have negative cash flow - it is usually based on large loans and capital expenditures, which, if properly used, can, however, provide significant future profits.

Dividing the company's market capitalization by the firm's free cash flow yields P/FCF ratio . Capitalization (Market Cap) is easy to find on yahoo or morningstar. A value less than 20 usually indicates good business, although any indicator should be compared with competitors and, if possible, with the industry as a whole.

It is possible to analyze the potential effectiveness of investment projects and the financial and economic activities of a firm or enterprise by studying information about the movement of money in them. It is important to understand the structure of cash flows, their size and direction, distribution over time. In order to conduct such an analysis, you need to know how to calculate cash flow.

Before risking their own money and deciding to invest in any venture that involves making a profit, a businessman must know what kind of cash flows it is capable of generating. The business plan should contain information about the expected costs and revenues.

The analysis usually consists of two steps:

• calculation of capital investments necessary for the implementation of the initiative and forecasting of cash flows (cash flow, or cash flow) that the project will generate;
• determination of the net present value, which is the difference between the inflow and outflow of cash.

Most often, the investment (outflow) occurs at the initial stage of the project and during a short initial period, after which the inflow of funds begins. To organize a well-managed structure, the cash flow is calculated as follows:

• in the first year of implementation - monthly;
• in the second year - quarterly;
• in the third and subsequent years - at the end of the year.

Often, experts consider cash flow as standard and non-standard:

• In the standard, all costs are incurred first, after which the proceeds from the activities of the enterprise begin;
• In non-standard negative and positive indicators can alternate. As an example, we can take an enterprise, after the end of the life cycle of which, according to the norms of the legislation, it is necessary to carry out a number of environmental measures (land reclamation after the completion of mining from a quarry, etc.).

Depending on the type of economic activity of the company, there are three main types of cash flow:

• Operating(basic). It is directly related to the work of the enterprise. In it, the main activity of the company (the sale of services and goods) acts as an inflow of funds, while the outflow occurs mainly to suppliers of raw materials, equipment, components, energy carriers, semi-finished products, that is, everything without which the activity of the enterprise is impossible.
• Investment. It is based on operations with long-term assets and profit from previous investments. The inflow here is the receipt of interest or dividends, and the outflow is the purchase of shares and bonds with the prospect of making a profit later, the acquisition of intangible assets (copyrights, licenses, rights to use land resources).
• Financial. Characterizes the activities of owners and management to increase the company's capital to solve the problems of its development. Inflow - funds from the sale of securities and obtaining long-term or short-term loans, outflow - money to repay loans taken, payment of dividends due to shareholders.

In order to correctly calculate the company's cash flow, it is necessary to take into account all possible factors influencing it, in particular, do not forget about the dynamics of changes in the value of money over time, i.e. discount. Moreover, if the project is short-term (several weeks or months), then bringing future income to the current moment can be neglected. If we are talking about undertakings with a life cycle of more than a year, then discounting is the main condition for the analysis.

Determining the amount of cash flow

The key indicator by which the prospects of the proposed initiative are calculated is the current value, or (English Net Cash Flow, NCF). This is the difference between positive and negative flows during a certain period of time. The calculation formula looks like this:

• CI - incoming flow with a positive sign (Cash Inflow);
• CO – outgoing cash flow with a negative sign (Cash Outflow);
• n is the number of inflows and outflows.

If we talk about the total indicator of the company, then it is necessary to consider its cash flow as the sum of three main types of cash receipts: main, financial and investment. In this case, the formula can be represented as follows:

it shows the financial flows:

• CFO - operational;
• CFF - financial;
• CFI - investment.

Calculation of the value of the present value can be done in two ways: direct and indirect:

• The direct method is adopted for intra-company budget planning. It is based on the proceeds from the sale of goods. Its formula also takes into account other receipts and expenses for operating activities, taxes, etc. The disadvantage of the method is that it cannot be used to see the relationship between changes in the volume of funds with the profit received.
• The indirect method is preferable because it allows you to analyze the situation more deeply. It makes it possible to adjust the indicator taking into account transactions that are not of a monetary nature. At the same time, it may indicate that the current value of a successful enterprise can be either more or less than profit for a certain period. For example, purchasing additional equipment reduces the cash flow relative to the amount of profit, while obtaining a loan, on the contrary, increases it.

The difference between profit and cash flow is as follows:

• profit shows the volume of net income for a quarter, year or month, this indicator is not always similar to Cash Flow;
• when calculating profits, some operations that are taken into account when calculating the movement of funds (repayment of loans, receipt of subsidies, investments or loans) are not taken into account;
• individual costs accrue and affect profit, but do not cause real cash costs (expected costs, depreciation).

The indicator of the value of the flow of money is used by business representatives to evaluate the effectiveness of an undertaking. If the NCF is above zero, then it will be accepted by investors as profitable, if it is zero or below it, it will be rejected as one that cannot increase the value. If you need to make a choice between two similar projects, preference is given to the one with more NFC.

Cash Flow Calculation Examples

Consider an example of calculating the cash flow of an enterprise for one calendar month. The initial data are distributed by types of activity.

Main:

• proceeds from the sale of products - 450 thousand rubles;
• expenses for materials and raw materials - (-) 120 thousand;
• salary of employees - (-) 45 thousand;
• general expenses - (-) 7 thousand;
• taxes and fees - (-) 36 thousand;
• loan payments (interest) - (-) 9 thousand;
• increase in working capital - (-) 5 thousand.

Total for core business - 228 thousand rubles.

Investment:

• investments in the land plot - (-) 160 thousand;
• investments in assets (purchase of equipment) - (-) 50 thousand;
• investments in intangible assets (license) - (-) 12 thousand rubles

Total for investment activities - (-) 222 thousand rubles.

Financial:

• registration of a short-term bank loan - 100 thousand;
• repayment of a previously taken loan - (-) 50 thousand;
• payments for equipment leasing - (-) 15 thousand;
• dividend payments - (-) 20 thousand.

Total financial activity - 15 thousand rubles.

Therefore, according to the formula, we obtain the required result:

NCF \u003d 228 - 222 + 15 \u003d 21 thousand rubles.

Our example shows that the monthly cash flow has a positive value, which means that the project has a certain positive effect, although not very large. At the same time, attention should be paid to the fact that in this month the loan was repaid, payment for the land plot was made, equipment was purchased, dividends were paid to shareholders. In order to prevent problems with paying bills and get a profit, I had to take a short-term loan from a bank.

Let's consider another example of Net Cash Flow calculation. Here, all the firm's flows are accounted for as cash inflows and outflows, without breakdown by activity.

Receipts (in thousand rubles):

• from the sale of goods - 300;
• interest on previously made investments - 25;
• other income - 8;
• from the sale of property - 14;
• bank loan - 200.

Total receipts - 547 thousand rubles.

Costs (in thousand rubles):

• for payment for services, goods, works - 110;
• for wages - 60;
• for fees and taxes - 40;
• for the payment of bank interest on a loan - 11;
• for the acquisition of intangible assets and fixed assets - 50;
• for loan repayment - 100.

Total costs - 371 thousand rubles.

Thus, we end up with:

NCF \u003d 547 - 371 \u003d 176 thousand rubles.

However, our second example is evidence of a rather superficial approach to the financial analysis of the state of the enterprise. Accounting should always be kept in the context of activities, based on data from management and analytical accounting, order journals, and the general ledger.

Experienced financiers and managers advise: in order to clearly control the movement of funds, the management of the enterprise should constantly monitor the inflow of funds from operating activities, studying the sales schedule broken down by customers and by each type of product.

Of the many expense items, 5-7 most costly items can be identified and tracked online. It is not advisable to detail the report by cost items too much, since dynamically changing small values ​​are difficult to analyze and can lead to an incorrect result. In addition, there are problems with regularly updating information on each item and comparing them with accounting data.

A number of simple ratios are used to estimate cash flows and specialized complex indicators, which include the following.

• 1. Momentary and interval multipliers reflecting the financial performance of an enterprise and defined as the ratio of the price of an enterprise's share to a number of final performance indicators at a particular point in time or over a period. Moment indicators include, for example:
  • the ratio of price and gross income;
  • the ratio of price and profit before tax;
  • price-to-net profit ratio;
  • the ratio of price and book value of equity capital.

As interval multipliers are used, for example:

• price-revenue ratio;
• price-to-profit ratio;
• price/cash flow ratio;
• price-to-dividend ratio.
• 2. Profitability indicators, for example:
  • return on assets ( ROA)- is defined as the ratio of net profit to the amount of assets;
  • return on investment ( ROI) - calculated as a return (the amount of income received, net profit) on invested capital;
  • return on equity ( ROE)- is calculated as the ratio of net profit to the share capital of the enterprise.
• 3. The capitalization method exists in two modifications:
  • direct capitalization, according to which the value of an enterprise is determined as the ratio of the net annual income that the enterprise receives to the capitalization rate calculated on equity capital;
  • mixed investments, when the value of the enterprise is determined as the ratio of the net annual income that the enterprise receives to the total capitalization rate, which is determined by the weighted average of the cost of equity and borrowed capital.
• 4. Profit-based valuation models, including

number with:

• indicator of profit before payment of interest, taxes and depreciation - EBITDA, which allows to determine the profit of the enterprise from the main activity and compare it with the same indicator of other enterprises;
• operating profit before interest and taxes - EBIT (earnings before interest and taxes), net operating income, net of adjusted taxes - NOPLAT (Net operating profit less adjusted tax) and net operating profit before interest expenses - NOPAT (Net operating profit after tax). The following scheme for calculating indicators is possible:

Revenue - Expenses for ordinary activities = EBIT - Tax(Adjusted Income Tax) = NOPLAT.

The income tax used in the calculation is called adjusted when there are differences between the financial and tax reporting of the enterprise. The current income tax in the statement of financial results and the amount of income tax calculated to be paid to the budget according to the tax return, as a rule, have different meanings. Indicators NOPLAT and NOPAT associated with the calculation of the value of economic value added EVA(English - economic value added). If when calculating the value NOPLAT data is taken from tax reporting, then the income tax value is taken from financial statements.

For calculation NOPLAT operating profit is used EBIT from operating activities, adjusted for the amount of taxes that the enterprise would pay if it did not have non-operating income and expenses and debt sources of financing. Company McKinsey & Co proposed the following calculation method NOPLAT

EBIT- Income tax from income statement -- Interest tax shield (Interest payment x Tax rate) - Non-operating income tax +

Change in the amount of deferred tax payments = NOPLAT.

Index NOPAT in the case when tax reporting is taken as a basis, it can be calculated according to the formula:

NOPAT= EBIT- Tax = EBIT ( 1 - CT),

where CT- operating income tax rate EBIT.

5. Cash flow indicator CF (cash flow) determines the financial result of the enterprise and is calculated as the difference between the total amount of income and expenditure of capital. When capital investment exceeds the amount of return, the value CF will be negative, otherwise it will be positive. Unlike profit-based valuation indicators, the indicator CE takes into account investment investments immediately - in the year of their implementation, and not in parts - through depreciation, as is customary in accounting when calculating profits. The value of the enterprise is determined from the expression:

Enterprise Value = Present Value of Cash Flows in the Forecast Period + Present Value of Cash

extended period flows.

The method is used when there is confidence in the correct determination of the amount of discounted cash flows for the years of the forecast and extended period.

• 6. Techniques combined in the concept of cost management VBM (value-based management), according to which the target function of management is cash flows and the value of the enterprise. At the end of the XX century. indicators have been developed, for example, MVA, SVA, CVA, CFROI, EVA, allowing to calculate cash flows and cost

McKinsey & Co, Copeland, Koller, Murrin. Valuation. 3rd edition, p. 163. Model of economic profit. See http://fmexp.com.ua/ru/models/eva, 2010.

enterprises when used as an information base

financial statements of the enterprise:

• using cash flow measures such as FCF (free cash flow - free cash flow), ECF (equity cash flow - cash flows to shareholders). This group of indicators operates with the concepts of discounted cash flows. In this case, the discount rate is calculated for the indicator ECF by model SARM, and to calculate the indicator FCF often taken equal to the value of the weighted average cost of capital WACC. As a result of calculating the indicator FCF records the cash flow available to shareholders and creditors of the company, and ECF- the cash flow available to shareholders after the repayment of debt obligations;
• using indicators NPV(English, net present value - net present value) and AGC(English, adjusted present value - adjusted present value). This group of indicators is used, for example, when an enterprise can be represented as a set of parts, each of which can be evaluated as an independent investment project. In the presence of one-time or time-distributed investments, the enterprise uses the indicator NPV. The NPV indicator is a net cash flow, defined as the difference between the inflow and outflow of cash, adjusted to the current point in time. It characterizes the amount of money that an investor can receive after the proceeds pay off the investments and payments. The difference in the calculation of the indicator AGC from the calculation of the indicator NPV consists in using the effect of "tax protection";
• based on the combination of income and expenses - model EBO (Edwards-Bell-Ohlson valuation model). In this case, the advantages of cost and income approaches are used. The value of an enterprise is calculated using the present value of its net assets and the discounted flow, defined as the deviation of profit from its industry average;
• based on the concept of residual income using indicators EUA(English, economic value added - economic value added), MUA(English, market value added - market value added) and SUA(English, cash value added - value added of the residual cash flow).

Let's consider separate indicators of an estimation.

• 1. Market value added indicator MVA allows you to evaluate the object on the basis of market capitalization and the market value of the debt. It shows the present value of current and future cash flows. Index MVA is calculated as the difference between the market price of capital and the amount of capital attracted by the enterprise in the form of investments. The higher the value of this indicator, the higher the value of the enterprise. The disadvantage of the indicator is that it does not take into account the intermediate return to shareholders and the opportunity cost of invested capital.
• 2. Indicator SVA(English - shareholder value added) is called an indicator of the calculation of the value on the basis of "shareholder" added value. It is calculated as the difference between the cost of equity before and after the transaction. When calculating this indicator, it is considered that the added value for shareholders is created in the case when the value of the return on investment capital ROIC more than the weighted average cost of capital raised WACC. This will continue only during the period when the company is actively using its competitive advantages. As soon as competition in this area increases, ROIC decreasing, the gap between ROIC and WACC will become insignificant and the creation of "shareholder" added value will cease.

There is another definition SVA is the increment between the estimated and book value of equity capital. The disadvantage of the method is the difficulty of predicting cash flows. The expression for calculating the cost is:

Enterprise value = Market value of invested capital at the beginning of the period + Amount SVA forecast period +

Market value of non-conducted activity assets.

• 3. Total shareholder return TSR(English - total shareholders return) characterizes the overall effect of the investment income of shareholders in the form of dividends, an increase or decrease in the company's cash flows due to an increase or decrease in the share price over a certain period. It determines the income for the period of ownership of the company's shares and is calculated as the ratio of the difference in the price of the company's shares at the end and beginning of the analyzed period to the share price at the beginning of the period. The disadvantage of this indicator is that it does not take into account the risk associated with investments, which is calculated in a relative form and determines the percentage of return on invested capital, and not the return amount itself, etc.
• 4. The cash flow indicator is determined by the return on invested capital CFROI(English - cash flow return on investment) as the ratio of adjusted cash inflows at current prices to adjusted cash outflows at current prices. The advantage of the indicator is that it is adjusted for inflation, since the calculation is based on indicators expressed in current prices. In the case when the value of the indicator is greater than the value set by the investors, the enterprise generates cash flows, and if not, then the value of the enterprise decreases. The disadvantage is that the result obtained is presented as a relative indicator, and not as a sum of costs.
• 5. Indicator CVA(English - cash value added) otherwise known as the LS/Zangl score. - residual cash flow) created in accordance with the concept of residual income and is defined as the difference between operating cash flow and the product of the weighted average cost of capital and the adjusted total assets. Unlike the indicator CFROI, This indicator takes into account the value wacc, and adjustments are similar to those made to calculate the indicator EVA.
• 6. Balanced Scorecard BSC(English - balanced

scorecard) was developed by D. Norton and R. Kaplan. The purpose of the system BSC is the achievement of the goals set by the enterprise and taking into account financial and non-financial factors for this. The system is based on the desire to take into account the interests of shareholders, buyers, creditors and other business partners.

System BSC arose as a result of the need to take into account non-financial indicators in business valuation and the desire to take into account indicators that are not included in financial statements. The purpose of its application is to obtain answers to a number of questions, including: how do customers, partners and government authorities evaluate the enterprise, what are its competitive advantages, what is the volume and effectiveness of innovation, what is the return on staff training and the introduction of corporate policy in the social life of the team ?

For effective business management in this case, it is necessary to determine the values, objectives and strategy acceptable to shareholders, debtors and creditors, and develop methods for quantifying these interests. As these issues are resolved, the system BSC become an important cash flow management tool.

7. Indicator of economic value added EVA(English - economic value added) used when it is difficult to determine the company's cash flows for the future. It is based on

residual income method developed by A. Marshall. Enterprise Value Based on Metric EVA in general can be calculated by the formula:

Enterprise value = Capital invested +

Present value EVA forecast period +

Present value EVA extended period.

Economic profit indicator EVA is calculated using information on investment projects and financial reporting data as the difference between profit after tax but before interest on borrowed funds and expenses (cost) on raising capital. Index EVA developed in the USA in the 1990s by Stern Stewart& Co, it allows you to compare how much a given enterprise earns in comparison with alternative projects. The value of the enterprise is equal to the sum of the invested capital, as well as the discounted values ​​of the indicator EVA current and future investments and is calculated by the formula:

EVA = NOPAT-SHSS x / C,

where tss- weighted average cost of capital; 1C- valuation of capital (the amount of invested or attracted capital).

Application of the indicator EVA provides for a number of adjustments to the values ​​of financial statement items to calculate NOPAT and /C described Stewart G. Bennett .

Positive value EVA indicates, as a rule, an increase in the value of the enterprise, and a negative one indicates its decrease. Management system developed on the basis of the indicator EVA, is called EVA-based management and determines the need:

• quantitative measurement of the performance of employees and managers with subsequent transition to assessment using aggregated indicators;
• development of generalized criteria for the effective placement and management of the capital of an enterprise;
• creation of incentives and motivation of work, systems of bonuses and remuneration and their mathematical description;
• development of indicators for assessing corporate culture, etc.

Index EVA can be used to evaluate the enterprise as a whole and to evaluate its individual objects.

• Lednev E.E. BSC and EVA® - competitors or allies? - http://www.cfm. ru/management/controlling/bsc-eva. shtml 04/16/2002
• Bennett G. Stewart. The Quest for Value. New York: Harper Business School Press, 1991; Copeland T., Koller T., Murrin J. The value of companies: valuation and management. Per. from English. M.: CJSC "Olimp-Business", 2005.

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Introduction

The discounted cash flow method assumes that the measure of discounted forecasted income A t from a business, which was considered earlier as the basis for determining its market value and the enterprise carrying out this business, is not forecasted profits, but cash flows.

The simplest definition of cash flow (Cash Flow) comes down to the fact that cash flow for a specific period (year, quarter, month) is nothing more than a balance of business receipts (with a “plus” sign) and payments (with a “ minus").

Past cash flows are accounted for simply as they appear on the entity's statement of cash flows.

Future cash flows provided by the business are projected based on the net profits from the business (gross income minus operating costs, interest on loans and income tax), adjusted to reflect as much as possible the balance of receipts and payments in a given future period .

The main advantages of business valuation, within the framework of the income approach, based on the forecast of cash flows, and not just profits, are as follows . Firstly, future business profits directly take into account only the expected current costs of production and sale of products, while future capital investments to maintain and expand the production or trading capacity of the business are reflected in the profit forecast only partially - through their current depreciation . Secondly, the lack of profit (loss) as an indicator in investment calculations for business valuation is also explained by the fact that profit, being a purely accounting reporting indicator, is subject to significant manipulations. Its declared value depends on the method of accounting for the cost of purchased resources in the cost of goods sold (LIFO, FIFO, moving average method), on the accelerated depreciation method, on the criterion for crediting products to sold products (on the fact of receipt of funds for its payment or on the fulfillment of the stipulated in contracts for the delivery of the delivery basis), etc.

The LIFO (last-in-first-out) method consists in the fact that the cost of purchased resources taken from stocks that are constantly replenished, but purchased at different times at inflationary prices, is calculated at the highest purchase prices of the last batches of materials received in stocks, raw materials, semi-finished products or components. As a result, the cost of manufactured and sold products is artificially (but quite legally) overestimated, and profits are underestimated. The FIFO (first-in-first-out) method, on the contrary, involves accounting for the cost of purchased resources in the cost of goods sold (included in the cost of products sold in the income statement) at the lowest prices of the earliest purchases, which reduces in the income statement and losses costs and increases the declared profit. The “moving average” method is also possible, when in the income statement the cost of a particular purchased product is calculated at the average price of its lots purchased at different times, weighted by their volumes. The choice of one of these three methods of accounting for the cost of purchased resources in the cost of goods sold is carried out by the enterprise itself (as an integral part of its accounting system), in relation to a specific product. With a product update (even a formal one), the situation of choice arises again, choosing the LIFO method (for example, to save on income taxes) or the FIFO method (for example, to improve published earnings and increase its financial attractiveness in the eyes of potential investors on the eve of new share issues) ), an enterprise, in fact, can seriously distort the real picture of its financial condition through the indicator of declared profit.

In addition, the enterprise does not “live” from profit. The whole real life of the enterprise and real money to investors as a result of investing their investments depend on the movement and availability of funds from the enterprise - the balance of funds on the current (settlement) account and cash on hand.

Let's consider the noted aspects in more detail.

1. Method dcash flow discounting

cash discounted capital

1.1 cash flows

Cash flow as a term, which has already been pointed out once, is a literal translation from the English “cash-flaw”. In the Russian official terminology (according to the already mentioned Guidelines for evaluating the effectiveness of investment projects and selecting them for financing, approved by the Ministry of Finance, the Ministry of Economics, Gosstroy and Goskomprom of the Russian Federation on March 31, 1994), this indicator is called the “balance of real money” or simply “real money” enterprises. This indicator reflects the cash flow of the enterprise and, taken into account at the end of the corresponding financial period (in some cases, it is advisable to keep records as of the middle of the corresponding period, which requires a decrease in the exponent in the discount factor by 0.5 - see below), reflects the balance of funds on the current (settlement) bank account of the enterprise in conjunction with the "cash" of its cash funds. Funds on deposit accounts are already considered as an asset invested in loan investments, blocked to a certain extent (hence, not liquid enough). The balance of receipts and payments made at the market value of the means of payment - barter, bills, etc. - are not studied here for simplicity. .

Using the discounted cash flow method, it is possible to operate in the calculations with either the so-called cash flow for equity or non-debt cash flow.

The cash flow for equity (full cash flow), working with which you can directly assess the market value of the company's equity (which is the market value of the latter), reflects in its structure the planned method of financing start-up and subsequent investments that ensure the life cycle of the product, ( business line). In other words, this indicator makes it possible to determine how much and under what conditions borrowed funds will be attracted to finance the investment process. For each future period, it takes into account the expected increase in long-term debt of the enterprise (the inflow of newly borrowed credit funds), the decrease in the enterprise's liabilities (the outflow of funds due to the repayment of part of the principal debt on previously taken loans planned for this future period), the payment of interest on loans in the order their current service. As long as the share and cost of borrowed funds in financing a business (investment project) is already taken into account in the forecasted cash flow itself, discounting the expected cash flows, if these are “full cash flows”, can occur at a discount rate equal to that required by the investor (taking into account risks) return on investment of only his own funds - that is, at the so-called discount rate for equity, which in the future (by default) will be simply called the "discount rate". Without debt, the cash flow does not reflect the planned movement and cost of credit funds used to finance the investment process. Therefore, if in the calculations they operate with it, then (in order to at least at the time of the probable offer of the enterprise for sale, in statics, to reflect the share and cost of borrowed funds attracted to it), discounting the cash flows expected for the investment project (at different stages of the business life cycle) should be made at a rate equal to the weighted average cost of capital of the enterprise. In this case, the expected residual value of the enterprise obtained by summing up the discounted cash flows without debt will be an estimate of the value of all capital invested in the enterprise, by the time it is resold. In other words, in order to estimate the value of his own capital (i.e., the market value of the enterprise as such), it will also be necessary to subtract the long-term (going beyond the financial period that serves as the size of the “time step” in this analysis) debt of the enterprise planned for the moment in question.

The cash flow for [estimating] equity (total cash flow) can be forecast in two ways:

Directly from the analysis of the terms, amounts and conditions of payments and receipts provided for by concluded purchase, sales, labor, lease, credit and other contracts, if their validity period fully ensures the entire life cycle of the business line or product in question (which is likely only for fairly short-term projects for which there are at least draft relevant contracts);

Based on an assessment of the need for investment and a forecast of future current income and expenses of the enterprise.

The most realistic, of course, is to start from the expected profits (losses), without counting on the ability to plan future account balances directly from the analysis of the contracts being concluded. Then the cash flow in a certain future period t (at the end of it - less often in the middle) can be expressed as follows:

"Cash flow in period t" \u003d "Profit (loss) for period t" + "Depreciation of previously purchased and created fixed assets (depreciation charges for period t)" - "Interest payments in period t on loans" - "Income tax" - "Investments in period t" + "Increase in long-term debt in period t" - "Decrease in long-term debt in period t" - "Increase in own working capital in period t".

Note that the growth of own working capital here means an increase in stocks of raw materials and materials, work in progress, as well as a stock of finished, but unsold or unpaid products - that is, everything that turned out to be related to own working capital and the cash used to replenish them resources. Let us also pay attention to the fact that the movement of short-term debt in the above formula is not taken into account, since it is believed that its turnover "fit" into the turnover of the enterprise's funds that took place within the corresponding reporting period (the interest for it was taken into account when calculating the cost of production). .

The structure of the formula for the total cash flow is quite simple: with a minus, it indicates the funds actually leaving the enterprise, with a plus, the incoming funds. The only exception is the depreciation of fixed assets (depreciation deductions for their depreciation): the appearance of this indicator in the cash flow formula means only that, by adding its value to the declared accounting profit, we, as it were, “restore justice” and compensate for what is already in the composition. the accounting expenses (costs) taken into account when calculating the profit included depreciation deductions for the depreciation of fixed assets, which nevertheless do not imply a real withdrawal of funds from the enterprise (they are only credited to the depreciation fund of the same enterprise).

Debt-free cash flow can be estimated using a formula similar to the above - with the difference, however, that it will not include interest payments, increase and decrease in long-term debt. The decisive element of cash flow in any form is the expected profit from the sale of the product. In general, the formula for its forecast for the period t looks like this:

where - profit from the sale of the company's product in period t;

P t is the expected selling price of the product in period t;

Q t - the planned number of sales of the company's product at a price P in period t; k = 1,..., K is the set of purchased resources (including labor of different qualifications) required for the production of the product (k is the number of the purchased resource, K is their total number);

P tk - purchase price of a purchased resource with number k in period t;

Q tk is the volume (in physical terms) of the purchased resource with the number k, necessary for the release of the final product in the amount of Q t ;

W t1 - overhead costs expected in period t (for a single-product venture enterprise, they can be zero).

Information about possible P t in relation to Q t can be obtained from marketing research of the predicted demand (its capacity and price elasticity) for the product being mastered. Information about probable P tk should be presented as a result of market research of the current and future supply of relevant purchased resources. The values ​​of Q tk are subject to assessment from the ideas (which enterprise managers need to have) about the technology of product release available to the enterprise (the matrix of Q tk values ​​for different resources and different subsequent periods of using this technology should be fairly accurately assessed by an expert - taking into account the planned as the development release of the product saving material, energy and labor resources).

Both cash flow for equity and non-debt cash flow can, in turn, be nominal (at future prices) or real (at prices of the base period, i.e., the period when the corresponding forecast is made).

The forecast of nominal cash flows requires an assessment of how the prices for all the resources purchased for the product and the prices for the product being mastered will change separately. At the same time, they try to take into account inflation expectations (the expected rate of inflation), which, most likely, will be different in the markets of different goods and services. In other words, when forecasting nominal cash flows, the expected prices of purchased resources and products are based on different rates of inflationary growth (which is natural, since general inflation always reflects the average price increase for various goods and services). They are trying to determine at what future actual prices (including both the inflation accumulated by the time of the planned sales and purchases, and inflation expectations for the period after these moments) sales and purchases will be carried out. Obviously, working with a nominal cash flow can provide a higher accuracy of investment calculations - provided, however, that the appraiser is really well versed in the current and expected market conditions in the markets for the product being mastered and the markets for the purchased resources required for it, relies on appropriate representative marketing research data markets, imagines the impact of future competition (calculates the effect of having certain competitive advantages). If he only approximately orients himself in the indicated conditions (the necessary marketing research has not been carried out), then the use of a nominal cash flow can introduce an even greater error into the investment calculation. .

Then the discounted cash flow method should be implemented, predicting real cash flows for the product line being developed. They represent the expected balances of receipts and payments for product sales and resource purchases in periods t, which will be valued at the prices of the base period (at the time of the valuation). This does not mean that the prices implied in the forecast of future cash flows will remain unchanged. They should be different for different future periods t, but only to the extent that the initial price (without including a “reserve” for expected inflation in its change) will be dependent on predicted shifts in the demand for a product or in the supply of a purchased resource.

Own, regardless of inflation, the pricing policy initially planned by the enterprise (for example, in terms of keeping the price of a new product in order to conquer the market below the cost of the product, temporarily increased during the development period, and then increasing, other things being equal, this price and maintaining it at a certain level for a sufficiently long time, with the expected reduction in the cost of the product as the experience of its release is accumulated - the so-called "umbrella" planned dynamics of the price of the enterprise - the pioneer of the new product) can also be taken into account when determining the future sales prices of the product, calculated in the prices of the base period .

Already in connection with the choice of the type of cash flow that will be used in assessing the current residual value of the product line (business line) at the time of the proposed resale of the enterprise, we immediately note that the type of cash flow included in the calculation should unambiguously determine (“looking ahead”) the type A discount rate that is adequate for the type of cash flow used and at which the cash flows forecast for the product should be discounted.

If they work with a nominal cash flow that takes into account prices in their predicted actual value when calculating expected profits (including inflationary price increases), then the discount rate should be nominal, i.e., including the average for the useful life of the project (the product line being mastered ) per unit period t inflation expectations.

If the cash flows are planned as real (in prices of the base period), then the discount rate must also be "cleared" from inflationary expectations.

Using the cash flow for equity capital in investment calculations, it is sufficient to use the nominal or real (depending on what - nominal or real - future cash flows are estimated) as a discount rate without a risky interest rate (in practice, the corresponding rate on government long-term bonds ), which, according to the methods below, in order to bring the same amount of initial investment without a risky loan alternative to a level of risks comparable to the project being calculated, is increased by the amount of risk premiums accepted on the market for the risks of this project. This rate is called the discount rate for assessing the equity of enterprise i.

Because the amount and cost of borrowings raised to finance project investments are already taken into account in the calculation of the projected cash flows themselves, it does not take into account the different cost of using equity and debt capital of the enterprise. Thus, if we use cash flows for equity capital as a measure of expected income from the business A t, then, according to the methodology of the income approach, the estimated market value of the business P will be equal to:

where DP t - cash flows forecast for the business for the next year (quarter, month) t for equity;

i - discount rate that takes into account business risks and is determined, for example, according to the capital asset valuation model or using the cumulative discount rate method.

When the subject of the valuation is an enterprise that carries out business, but also has excess assets for this business (“non-performing assets”, which, however, not only do not function at the time of valuation, but are not needed for it in the future, do not determine in during the term n the expected cash flows from it, already included in the calculation of the PV rem indicator). to to the value reflected above, their market value of NFA* should be added:

For the most general case, when the enterprise being valued runs several businesses (produces several types of products) with numbers j (j=1, .J) and, in addition, has excess assets for all of them, the estimated market value of the enterprise can be presented as the sum of market the value of his businesses plus the market value of their surplus assets:

If a part of the property of an enterprise is only temporarily not needed for its businesses, then it cannot be included in the NFA* indicator, as this will eliminate the possibility of taking into account when calculating the value of businesses those incomes that are relied on in the future after the start of using only temporarily unnecessary assets. In such situations, you should try to include in the set of business lines of the enterprise the delivery of temporarily excess assets for rent (leasing).

1.2 Definition of becomingki discount fordiscounting withoutdebtcash flows (weighted average cost of capital)

In cases where, for some reason, it is impossible to plan cash flows along the product line, taking into account the movement of borrowed funds (a specific method of financing investments that are planned in future periods t, starting with start-up investments, has not yet been worked out, all relevant loan agreements have not been prepared lenders are only invited to finance the business (project) at risk-compensating rates), the relative cost of debt and equity should be reflected at least in the discount rate.

At the same time, the current value of the business, if such an assessment is obtained on the basis of expected non-debt cash flows, assumes that:

From a preliminary assessment of the present value of the expected non-debt cash flows from the business, obtained on the basis of their discounting at a special (discussed below) discount rate, the amount of the enterprise's debt on loans taken by it before the project appraisal should be deducted;

Over the life of the project, the share of its loan financing (including from new loans) and the interest rate on loans (new) do not change from the time the project was evaluated – an assumption that may in fact turn out to be too rough.

According to the weighted average cost of capital method, the discount rate for discounting without debt cash flows is the minimum required rate of return per unit (ruble, dollar) of mixed (own and debt) financing of the project.

In terms of the project’s own financing, this minimum required rate of return from each own penny (cent), ruble (dollar) of the specified mixed financing represents the recovery of lost income from not using a unit of own funds for investing in an investment alternative comparable in terms of risks. .

In other words, the minimum required rate of return on the share of own financing of a unit of business value is equal to the discount rate for [evaluating the change in] the investor's equity, determined according to the option described above that is most appropriate in a particular situation. The minimum required rate of return on each borrowed penny (cent), ruble (dollar) of mixed business financing is equal to the cost of the debt taken, reflected by the interest rate for a specific loan agreement concluded by the enterprise in the interests of its business (in the case of concluding several loan agreements - the average interest rate on them weighted by the volume of these loan agreements) net of tax savings per unit of debt financing.

For calculation purposes, it is permissible, instead of the interest rate on loan agreements already concluded in the interests of the business in question (at least potentially), to use the interest rate expected under loan agreements that are actually concluded in the interests of business development.

The noted savings on taxation are ensured by the fact that the legislation allows you to reduce taxable income on interest payments on long-term (more than a year) loans - provided that the interest rate on them is not higher than the refinancing rate of the Central Bank of the Russian Federation by more than three percentage points. Numerically, therefore, the discount rate for discounting expected business cash flows without debt (aka the weighted average cost of capital) is set as follows:

i svk= i x d ck+ i x d zk x (1-h),if i kp? i CB +0,03

i svk= i x d ck+(i CB +0,03) x

d zk X (1-h) +[ i kr- (i CB +0,03)] ,

ifi kp? i CB +0,03) x d zk ,

if i kr> i CB +0,03

where i is the discount rate for (estimating the change in) the investor's equity;

d CK , d 3K - share of equity and debt financing of the considered project, respectively;

i CB- the refinancing rate of the Central Bank of the Russian Federation;

h - profit tax rate (taking into account other tax fees levied on profit);

i kr - the interest rate on the loan agreements concluded or planned during the project.

In the case of several loan agreements, the discount rate is determined as follows:

where I kpj - interest rate under the j-th loan agreement;

j - 1,..., M - numbers of credit agreements;

V kpj - volumes of j-th credit agreements.

For particularly long-term businesses with a useful life of about 20-25 years, in the formula for the variable weighted average cost of capital (variable rate for discounting without debt cash flows), it is permissible to provide for the instability of the cost of borrowed capital over time in the form of a rate on future loans. If the company being valued widely uses foreign borrowings, the variable rate i kpt can be entered into the specified formula at the level of the forecasted and actual LIBOR rate for the corresponding period t.

If during the useful life of especially long-term projects, two or three long periods can be distinguished, during which the rates i and i kpt will be significantly different in one case and still relatively constant within these two or three periods, then for these periods it may be recommended to evaluate your variable discount rates using the formula of the weighted average cost of capital and apply for discounting without debt cash flows for the years included in the later (second-third) selected periods of the useful life, the rates i svk, which would represent average values ​​( cumulative) from the rate for the current long period and the rates for previous allocated long periods of the life of the business.

Considering that in relation to especially long-term investment projects (businesses), the discount rate equal to the weighted average cost of capital may change from one selected long period within the useful life of the project to another such period, not only due to the variability of the loan rate, but also due to changes in the individual discount rate i for the company's equity (because of the volatility over time of the underlying nominal risk-free interest rate, which in turn is often reflected in government bond yields), the general formula for the investing company's variable weighted average cost of capital becomes:

where T is the number of a standard (equal to others) long period within the useful life T of a particularly durable project;

T=1,..., n/L, L - the number of specified standard long periods in the period T;

R t is the predicted average yield of government bonds over a standard long period equal to term T;

D - premium for project risks (discussed in the section on the discount rate for equity capital);

d CKt and d CKt are the shares of equity and debt financing of the business under consideration, respectively, expected in periods T;

h t is the income tax rate expected for the standard long period t.

We emphasize that when using without debt cash flows (DC BDt), as well as the weighted average cost of capital as the rate for its discounting, the residual value of the business, equal to the projected value of the SC* of the equity of the enterprise carrying it out (i.e., its price C), can be determined (without taking into account excess assets) only after the debt (debt capital of the LC) carrying out the business of the enterprise that it has at the time of assessment:

2. Discounted cash flow method

The discounted cash flow method (DCF) is more complex, detailed and allows you to evaluate an object in case of receiving unstable cash flows from it, modeling the characteristic features of their receipt.

The DDP method is applied when:

Future cash flows are expected to be materially different from current ones;

Evidence is available to justify future real estate cash flows;

Income and expense streams are seasonal;

The property being appraised is a large multifunctional commercial facility;

The property is under construction or has just been built and input: (or put into operation).

The discounted cash flow method is the most versatile method for determining the present value of future cash flows. Cash flows can change arbitrarily, flow unevenly and be characterized by a high level of risk. This is due to the specifics of such a thing as real estate. Real estate is acquired by the investor in the main isopore of shared benefits in the future. The investor considers the property as a set of future benefits and assesses its attractiveness in terms of how the monetary value of these future benefits correlates with the price at which the property can be acquired.

The DCF method evaluates the value of real estate based on the present value of income, which consists of projected cash flows and residual value.

Algorithm for calculating the DDP method.

1. Definition of the forecast period.

The definition of the forecast period depends on the amount of information sufficient for long-term forecasts. A carefully executed forecast allows you to predict the nature of changes in cash flows for a longer period.

In international valuation practice, the average value of the forecast period is 510 years; for Russia, a typical value will be a period of 35 years. This is a realistic period for which a reasonable forecast can be made.

2. Forecasting the amount of cash flows from the real estate object for each forecast year.

Forecasting cash flows, including reversion, requires:

· careful analysis based on the financial statements submitted by the customer on income and expenses from the property in the retrospective period;

· studying the current state of the real estate market and the dynamics of changes in its main characteristics;

· Forecast of income and expenses based on the reconstructed income statement.

When assessing real estate using the DCF method, several types of income from the object are calculated:

1) potential gross income;

2) actual gross income;

3) net operating income;

4) cash flow before taxes;

5) cash flow after taxes.

Post-tax cash flow is the pre-tax cash flow minus the property owner's income tax payments. In practice, Russian appraisers discount income instead of cash flows:

· NPC (indicating that the property is accepted as not burdened with debt obligations),

net cash flow excluding operating costs, land tax and reconstruction,

taxable income.

Features of calculating cash flow when using the method.

· Property tax (real estate tax), which is composed of land tax and property tax, must be deducted from the actual gross income as part of operating expenses.

· Economic and tax depreciation is not a real cash payment, so accounting for depreciation in income forecasting is redundant.

· Loan servicing payments (payment of interest and repayment of debt) must be deducted from net operating income if the investment value of the object (for a particular investor) is assessed. When evaluating the market value of a property, you do not need to read the loan maintenance payments.

· Business expenses of the property owner must be deducted from the actual gross income if they are aimed at maintaining the necessary characteristics of the property.

In this way:

DIA \u003d DIA - Losses from unemployment and in the collection of rent + Other income,

CHOD \u003d DVD - OR - Entrepreneurial expenses of the owner of immovable property related to real estate,

Cash flow before taxes = NRF - Capital investment - Loan servicing + Credit growth.

Cash flow for real estate after taxes =

Pre-Tax Cash Flow - The income tax payments of the property owner.

3. Calculation of the cost of reversion.

Reversion is the residual value of an object when the income stream ceases to flow.

The cost of reversion can be predicted using:

1) setting the sale price based on an analysis of the current state of the market, monitoring the cost of similar objects and assumptions regarding the future state of the object;

2) making assumptions regarding changes in the value of real estate over the period of ownership;

3) capitalization of income for the year following the year of the end of the forecast period, using independently calculated capitalization rate.

4. Determination of the discount rate.

The discount rate is the rate of interest used to calculate the present value of a sum of money received or paid in the future.

The discount rate reflects the relationship of risk - income, as well as the various types of risk inherent in this property.

The capitalization ratio is the rate applied to bring the stream of income to a single amount of value. However, in our opinion, this definition gives an understanding of the mathematical essence of this indicator. From an economic point of view, the capitalization ratio reflects the investor's rate of return.

Theoretically, the discount rate for a property should directly or indirectly take into account the following factors:

compensation for risk-free, liquid investments;

compensation for risk

compensation for low liquidity;

compensation for investment management.

The relationship between nominal and real rates is expressed by Fisher's formulas.

Cash flows and the discount rate must match each other and be calculated in the same way. The results of calculating the present value of future cash flows in nominal and real terms are the same.

In Western practice, the following methods are used to calculate the discount rate:

1) the method of cumulative construction;

2) method of comparison of alternative investments;

3) extraction method;

4) monitoring method.

The cumulative construction method is based on the premise that the discount rate is a function of risk and is calculated as the sum of all risks inherent in each particular property.

Discount Rate = Risk Free Rate + Risk Premiums.

The risk premium is calculated by summing the risk values ​​inherent in a given property.

The method of comparing alternative investments is used most often when calculating the investment value of a property. The discount rate can be taken as:

ь return required by the investor (set by the investor);

ь expected profitability of alternative projects and financial instruments available to the investor.

Selection method - the discount rate, as a compound interest rate, is calculated on the basis of data on completed transactions with similar objects in the real estate market. This method is quite labor intensive. The calculation mechanism consists in the reconstruction of the assumptions about the amount of future income and the subsequent comparison of future cash flows with the initial investment (purchase price). In this case, the calculation will vary depending on the amount of initial information and the size of the rights being assessed.

The discount rate (as opposed to the capitalization ratio) cannot be derived directly from the sales data, as it cannot be calculated without identifying the buyer's expectations of future cash flows.

The best option for calculating the discount rate using the allocation method is to interview the buyer (investor) and find out what rate was used to determine the sale price, how the forecast of future cash flows was built. If the appraiser has completely received the information of interest to him, then he can calculate the internal rate of return (final return) of a similar object. It will be guided by the obtained value when determining the discount rate.

Although each property is unique, under certain assumptions it is possible to derive discount rates using the extraction method that will be consistent with the overall accuracy of future forecasts. However, it should be taken into account that purchase and sale transactions of such comparable objects, the existing use of which is the best and most efficient, should be selected as similar ones.

The usual algorithm for calculating the discount rate using the allocation method is as follows:

ь modeling for each analogue object for a certain period of time according to the scenario of the best and most efficient use of income and expense flows;

ь calculation of the rate of return on investments for the object;

ь to process the obtained results in any acceptable statistical or expert way in order to bring the characteristics of the analysis to the object being evaluated.

The monitoring method is based on regular monitoring of the market, tracking the main economic indicators of investments in real estate according to transactions. Such information should be summarized for various market segments and published regularly. Such data serve as a guide for the appraiser, allow a qualitative comparison of the obtained calculated indicators with the average market ones, checking the validity of various kinds of assumptions.

If it is necessary to take into account the impact of risk on the amount of income, adjustments should be made to the discount rate when evaluating single real estate objects. If income is generated from two main sources (for example, from basic rent and interest surcharges), one of which (basic rent) can be considered guaranteed and reliable, then one rate of income is applied to it, and the other source is discounted at an increased rate (for example, the amount interest surcharges depends on the tenant's turnover and is an uncertain value). This technique allows you to take into account a different degree of risk when receiving income from one property. By analogy, it is possible to take into account the various degrees of risk of receiving income from a real estate object over the years.

Russian appraisers most often calculate the discount rate using the cumulative construction method (formula). This is due to the greatest simplicity of calculating the discount rate using the cumulative construction method in the current conditions of the real estate market.

5. Calculation of the value of a property using the DCF method

Calculation of the value of the property using the DCF method is carried out according to the formula:

The cost of the reversion should be discounted (by the factor of the last forecast year) and added to the sum of the current values ​​of the cash flows.

Thus, the value of a property is equal to the sum of the present value of the projected cash flows and the present value of the residual value (reversion).

Conclusion

The market valuation of a business largely depends on its prospects. When determining the market value of a business, only that part of the capital that can generate income in one form or another in the future is taken into account. At the same time, it is very important at what stage of business development the owner will begin to receive these incomes and what risk this entails. All these factors that affect the valuation of the business, allows you to take into account the discounted cash flow method.

Determining the value of a business using the discounted cash flow method is based on the assumption that a potential investor will not pay for this business an amount greater than the present value of future income from this business. The owner will not sell his business for less than the present value of projected future earnings. As a result of the interaction, the parties will come to an agreement on a market price equal to the present value of future income.

This valuation method is considered the most appropriate from the point of view of investment motives, since any investor who invests in an operating enterprise, in the end, does not buy a set of assets consisting of buildings, structures, machinery, equipment, intangible assets, etc., but a stream of future income that allows him to recoup his investment, make a profit and increase his well-being. From this point of view, all enterprises, no matter what sectors of the economy they belong to, produce only one type of marketable product - money.

The discounted cash flow method can be used to value any going concern. However, there are situations when it objectively gives the most accurate result of the market value of the enterprise.

The application of this method is most justified for assessing enterprises that have a certain history of economic activity (preferably profitable) and are at the stage of growth or stable economic development. This method is less applicable to the valuation of enterprises that suffer systematic losses (although a negative value of the business value may be a fact for making managerial decisions). Reasonable caution should be exercised in applying this method to the evaluation of new ventures, even promising ones. The lack of a retrospective of profits makes it difficult to objectively predict the future cash flows of a business.

Bibliography

1. "Expert", No. 36, 1999, No. 16, 2003

2. Portal for valuation specialists - Access mode: http://profiocenka.ru

3. Bocharov V.V. "Financial management. - St. Petersburg: Peter, 2007.

4. Savchuk V. P. Financial management of the enterprise. - M. : BINOM Laboratory of Knowledge, 2003. - 480 p.

5. Kovalev VV Introduction to financial management. - M. : Finance and statistics, 2003. - 768 p.

6. Blokhin VG Investment analysis. - Rostov n / a: Phoenix, 2004. - 320 p.

7. Brigham Yu., Erhardt M. Financial management. - 10th ed.: Per. from English. - St. Petersburg. : Peter, 2005. - 960 p.

8. Valdaytsev S.V. Business valuation. Textbook, M.: Prospekt, 2004.

9. Kovalev VV Financial analysis: Capital management. Choice of investments. Reporting analysis. - M. : Finance and statistics, 1995. - 432 p.

10. Shcherbakov V. A., Shcherbakova N. A. “Estimation of the value of an enterprise (business)” - M .: Omega-L, 2006.

11. Sycheva G.I., Kolbachev E.B., Sychev V.A. Enterprise (business) valuation. Rostov n/a: Phoenix, 2004.

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