“Comment, question or quotation of the day”

12-12-2017 : Quote of the day

"The richer you are, the harder it is to know how much you are worth." Felix Dennis, a British multimillionaire

11-12-2017 : Question from a Facebook follower

I have to value an industrial company that will make a big investment for the launch of a new factory from 2022 that will replace the current plant. The investment in the coming years (from today to 2021) is so heavy that the company has significant negative free cash flows that are not compensated by the activity in the current premises and are slightly compensated by the terminal value. Even by making a cash flow fade over the next few years, this does not bring out with a positive valuation. Should we do some corrections? Which valuation approach would you adopt in such a situation?   Have you take into account the resale value of the current plant once the new plant is operational in your flows?   Check your calculations again.   If your flows do not change, it means that this new plant is unprofitable and likely to sink the company. It may be necessary to ask the question of the relevance of this investment rather than the valuation of this company.   Have a nice day.  



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The Vernimmen.com Letter

Number 107 of October 2017

News : Why have the main European banking and insurance groups listed – or why are they planning to list – some of their subsidiaries?

Statistics : Yield curves in some major countries

Research : IPOs: the virtue of the greenshoe clause

Q&A : What is structural subordination?

COMMENTS : Comments posted on Facebook