Book description
A clear and comprehensive guide to financial modeling and valuation with extensive case studies and practice exercises
Corporate and Project Finance Modelingtakes a clear, coherent approach to a complex and technical topic. Written by a globallyrecognized financial and economic consultant, this book provides a thorough explanation of financial modeling and analysis while describing the practical application of newlydeveloped techniques. Theoretical discussion, case studies and stepbystep guides allow readers to master many difficult modeling problems and also explain how to build highly structured models from the ground up. The companion website includes downloadable examples, templates, and hundreds of exercises that allow readers to immediately apply the complex ideas discussed.
Financial valuation is an indepth process, involving both objective and subjective parameters. Precise modeling is critical, and thorough, accurate analysis is what bridges the gap from model to value. This book allows readers to gain a true mastery of the principles underlying financial modeling and valuation by helping them to:
 Develop flexible and accurate valuation analysis incorporating cash flow waterfalls, depreciation and retirements, updates for new historic periods, and dynamic presentation of scenario and sensitivity analysis;
 Build customized spreadsheet functions that solve circular logic arising in project and corporate valuation without cumbersome copy and paste macros;
 Derive accurate measures of normalized cash flow and implied valuation multiples that account for asset life, changing growth, taxes, varying returns and cost of capital;
 Incorporate stochastic analysis with alternative time series equations and Monte Carlo simulation without addins;
 Understand valuation effects of debt sizing, sculpting, project funding, refinancing, holding periods and credit enhancements.
Table of contents
 Cover
 Title Page
 Copyright
 Preface
 Acknowledgments

Part I: Financial Modeling Structure and Design
 Chapter 1: Financial Modeling and Valuation Nightmares
 Chapter 2: Becoming a Black Belt Modeler
 Chapter 3: General Model Objectives of Structuring Transactions, Risk Analysis, and Valuation

Chapter 4: The Structure of Alternative Financial Models
 Structure of a Corporate Model: Incorporating Historyand Deriving Forecasts from Historical Analysis
 Use of the INDEX Function in Corporate Models
 Easing the Pain of Acquiring PDF Data
 Structure of a Project Finance Model That Accounts for Different Risks in Different Phases over the Life of a Project
 Reconciliation of Internal Rate of Return in Project Finance with Return on Investment in Corporate Finance
 Structure of an Acquisition Model: Alternative Transaction Prices and Financing Terms
 Structure of an Integrated Merger Model: Forecasting Earnings per Share
 Chapter 5: Avoiding Bad Programming Practices and Creating Effective Auditing Processes

Chapter 6: Developing and Efficiently Organizing Assumptions
 Assumptions in DemandDriven Models versus SupplyDriven Models: The Danger of Overcapacity in an Industry
 Creating a Flexible Input Structure for Model Assumptions
 Alternative Input Structures for Project Finance and Corporate Finance Models
 Setting Up Inputs with Code Numbers and the INDEX Function

Chapter 7: Structuring Time Lines
 Timing in Corporate Finance Models: Distinguishing the Historical Period, Explicit Period, and Terminal Period
 Development to Decommissioning: Phases in the Life of a Project Finance Model
 Timing in Acquisition Models: Separating the Transaction Period, the Holding Period, and the Exit Period
 Structuring a Time Line to Measure History, Explicit Periods, and Terminal Periods in Corporate Models and Risk Phases in Project Finance Models
 Computing Start of Period and End of Period Dates
 TRUE and FALSE Switches in Modeling Time Periods
 Computing the Age of a Project in Years on a Monthly, Quarterly, or Semiannual Basis
 The Magic of a HISTORIC Switch in a Corporate Model
 Transferring Data from a Corporate Model to an Acquisition Model Using MATCH and INDEX Functions
 Chapter 8: Projecting Revenues, Expenses, and Capital Expenditures to Derive Pretax Cash Flow

Chapter 9: Moving from Pretax Cash Flow to AfterTax Free Cash Flow
 Working Capital Analysis
 Problems in Computing Depreciation Expense in Corporate Models Involving Asset Retirements
 Portfolios of Assets with a Vintage Process
 Accounting for Asset Retirements in Corporate Models
 Alternative Methods for Deriving Retirements Associated with Existing Assets in Corporate Models
 Depreciation Issues in Project Finance Models
 Modeling the Change in Deferred Taxes in Corporate Models
 Adjusting the Tax Basis in an Acquisition

Chapter 10: Adding Debt to a Corporate or Project Finance Model by Programming Cash Flow Waterfalls
 Adding the Debt Schedule to a Financial Model
 Modeling Scheduled Debt Repayments
 Connecting Debt to Cash Flow in Corporate Models
 With a Structured Process, You Can Model Any Cash Flow Waterfall
 Defaults on Debt and Measuring the Debt Internal Rate of Return
 Assessing Risk and Return Characteristics of Subordinated Debt
 Chapter 11: Alternative Calculations of Equity Distributions
 Chapter 12: Putting Together Financial Statements and Calculating Income Taxes

Part II: Analyzing Risks with Financial Models
 Chapter 13: Risk Assessment
 Chapter 14: Defining, Describing, and Assessing Risk in a Risk Allocation Matrix
 Chapter 15: Presentation of Risk Analysis through Adding Sensitivity Analysis to Financial Models
 Chapter 16: Using Financial Models to Establish BreakEven Points for Key Input Variables with Data Tables
 Chapter 17: Constructing Flexible Scenario Analysis for Risk Assessment

Chapter 18: Generating Tornado Diagrams, Spider Charts, and Waterfall Graphs
 Tornado Diagrams That Display Which Variables Have the Largest Effect on Value and Which Variables Have the Least Effect on an Output Variable
 Creating a Tornado Diagram by Extending Scenario Analysis
 Creating a Tornado Diagram Using a TwoWay Data Table
 Spider Diagrams That Illustrate How Each Range in Input Variables Affects an Output Variable
 How to Create a Spider Diagram Using a TwoWay Data Table
 Presenting Sensitivity Analysis with a Waterfall Chart
 Chapter 19: Adding Probabilistic Risk Analysis and Time Series Equations to Financial Models
 Chapter 20: Taking the Mystery out of Applying Time Series Analysis and Monte Carlo Simulation in Financial Models

Chapter 21: Constructing Probability Distributions with Trends, Mean Reversion, Price Boundaries, and Correlations among Variables
 Starting Point for Developing Time Series Equations—Brownian Motion and Normal Distributions
 Testing the Assumption That Input Variables Are Normally Distributed
 Price Boundaries and ShortRun Marginal Cost
 Mean Reversion and LongRun Equilibrium Analysis
 Modeling Correlations among Variables in Time Series Equations
 Chapter 22: The Difficult Problem of Estimating Volatility, Mean Reversion, Time Trends, Correlations, and Price Boundaries from Historical Data or Market Data

Part III: Advanced Corporate Modeling: Modeling Terminal Value with Stable Ratios in the Discounted Cash Flow Model, Deriving Implied Multiples, and Computing the Bridge between Equity Value and Enterprise Value
 Chapter 23: Overview of Issues When Computing Normalized Cash Flow and Terminal Value
 Chapter 24: Computing the Return on Invested Capital for Historical and Projected Periods in Corporate Models
 Chapter 25: Calculation of Invested Capital
 Chapter 26: Complex Items in Balance Sheet Analysis
 Chapter 27: Four General Terminal Value Methods
 Chapter 28: Terminal Value and Philosophy
 Chapter 29: Normalizing Terminal Year Cash Flows for Stable Working Capital Investment

Chapter 30: Relationship of Growth, Capital Expenditures, Depreciation, and Return on Investment
 The LongTerm Stable Ratio of Capital Expenditures to Depreciation and the Ratio of Depreciation Expense to Net Plant
 Computing the Ratio of Capital Expenditures to Depreciation When Historical Growth Differs from Prospective Growth
 Computing the Ratio of Capital Expenditures to Depreciation
 Implementing the Stable Ratio of Capital Expenditures to Depreciation in Valuation Analysis
 Chapter 31: Computing Normalized Deferred Tax Changes
 Chapter 32: Terminal Value and the Ability of a Company to Earn Returns above the Cost of Capital

Chapter 33: Errors and Distortions in Applying the Value Driver Formula
 Deriving the Value Driver Formula for the Price/EarningsRatio and Equity Value
 Deriving Implicit Assumptions about the Progression of the Incremental Return on Equity in the EquityBased Value Driver Formula
 Deriving the Value Driver Formula Using the Return on Invested Capital and the Weighted Average Cost of Capital
 Biases in the Value Driver Formula in a Case with Only Working Capital
 Problems of the Value Driver Formula When Invested Capital Includes Net Plant
 Chapter 34: Computing Implied Price/Earnings Ratios for Use in Terminal Value Calculations
 Chapter 35: Computing an Implied EV/EBITDA Ratio in Terminal Value Calculations
 Chapter 36: Developing Value Drivers for P/E and EV/EBITDA Ratios with Benchmarking and Regression

Part IV: Complex Issues: Circular References and Other Complex Issues from Financial Structuring in Project Finance and Corporate Finance Models

Chapter 37: Resolving Circular References in Acquisition Models
 Circular References and Use of Opening Balances in Annual Models
 Alternative Techniques for Solving Circular Reference Logic Problems in Financial Models
 Resolution of Circular References from a Cash Flow Sweep Using the Iteration Button
 Solving Circular References from Cash Sweeps with Goal Seek and Solver
 Solving Basic Circular References from Cash Sweeps with a Horrible Copy and Paste Macro
 Solving Circular References Related to a Cash Sweep Using Algebra
 Solving Circular References with Functions That Iterate around Equations That Cause the Problem
 Chapter 38: Creating a Structured Cash Flow Process in a Corporate Model to Resolve Circular References
 Chapter 39: Overview of Complex Project Finance Modeling Structuring Issues

Chapter 40: Funding Techniques in Project Finance and the Associated Circular Reference Problems
 Case 1: No Circular Reference—ProRata Funding, Interest Paid during Construction, and Debt Size from Cash Flow
 Case 2: Circular Reference from ProRata Funding with Capitalized Interest or Debt Ratio Input
 Case 3: ProRata Funding with Capitalized Fees
 Case 4: Cascade with Equity Funded before Debt That Can Be Solved with Backward Induction
 Case 5: Bond Financing in a Single Period

Chapter 41: Debt Sculpting in a Project Finance Model
 Sculpting Method 1: Use of Solver
 Sculpting Method 2: Goal Seek and Algebra
 Sculpting Method 3: Net Present Value of Target Debt Service
 Sculpting Method 4: Backward Induction
 Sculpting Approaches in Complex Cases with Taxes, Debt Service Reserve Accounts, and Interest Income
 Solving Difficult Sculpting Problems with UserDefined Functions
 Chapter 42: Automating the Goal Seek Process for Annuity and Equal Installment Repayments
 Chapter 43: Modeling Debt Service Reserve Accounts
 Chapter 44: Modeling Maintenance Reserve Accounts
 Chapter 45: Refinancing and Valuing a Project Given Risk Changes over the Life of a Project
 Chapter 46: Covenants and Cash Flow Sweeps in Project Finance Models
 Chapter 47: Asset Portfolios, Progress Payments, and Lease Rolls in Real Estate Models

Chapter 37: Resolving Circular References in Acquisition Models
 About the Author
 About the Website
 Index
 End User License Agreement
Product information
 Title: Corporate and Project Finance Modeling
 Author(s):
 Release date: November 2014
 Publisher(s): Wiley
 ISBN: 9781118854365
You might also like
book
Options, Futures, and Other Derivatives, 10th Edition
For courses in business, economics, and financial engineering and mathematics. The definitive guide to derivatives markets, …
book
Investment Theory and Risk Management, + Website
A unique perspective on applied investment theory and risk management from the Senior Risk Officer of …
book
The Private Equity Toolkit
Master the navigation of private equity deals from sourcing to exit with this comprehensive guide The …
book
Microsoft Excel 2019 Data Analysis and Business Modeling, 6th Edition
Master business modeling and analysis techniques with Microsoft Excel 2019, and transform data into bottomline results. …