Business Valuation Methods and Intangibles
Asset, earnings, cash-flow and market approaches, cost of capital, intangibles and sensitivity.
How to study CIMA Strategic Level
Secure E3, P3 and F3 knowledge before practising integrated long-term judgement and professional communication. Static study assets do not reproduce all objective-test interactions or the pre-seen, unseen information, locked written sections and human marking of the Strategic Case Study.
Core concepts
Concept 1
Select and apply appropriate valuation approaches.
Exam cue: Match the valuation method to purpose and evidence.
Concept 2
Estimate cash flows, terminal value and discount rates consistently.
Exam cue: Keep cash-flow definition and discount rate consistent.
Concept 3
Evaluate intangible value, assumptions and sensitivity.
Exam cue: Present a range and identify the assumptions driving it.
Risk pitfalls and guardrails
Mixing enterprise cash flows with an equity discount rate.
Guardrail: Check the applicable blueprint, task verb, assumptions, units, evidence provenance, stakeholder effects, residual risk and whether the conclusion follows.
Treating terminal value as a plug.
Guardrail: Check the applicable blueprint, task verb, assumptions, units, evidence provenance, stakeholder effects, residual risk and whether the conclusion follows.
Double counting separately valued intangibles in forecast cash flows.
Guardrail: Check the applicable blueprint, task verb, assumptions, units, evidence provenance, stakeholder effects, residual risk and whether the conclusion follows.
Memory anchors
Enterprise value
Value of operations available to all capital providers before net debt and other equity adjustments.
Terminal value
Estimated value of cash flows beyond the explicit forecast period.
Valuation range
A defensible interval reflecting methods, assumptions and uncertainty rather than false point precision.
Checkpoint rule
Do the check-up only after you can summarize each concept in one sentence and identify one dangerous pitfall from memory.
Knowledge Check (after reading)
Short check-up to confirm understanding of this module.
Check-up Questions
A mature business is expected to generate £6 million of free cash flow to the firm every year indefinitely, with no growth. If WACC is 10%, what enterprise value does a perpetuity model give?
Free cash flow to the firm next year is forecast at £4 million, perpetual growth is 3% and WACC is 11%. What value follows from the constant-growth perpetuity formula?
Answer all questions to submit.
Next step personalized recommendations
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Move forward only after this module is stable.
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