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  "documentTitle": "Bear Stearns | Investment Banking Pitch Book | 36 slides",
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  "authorName": "Bear Stearns",
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  "presentationDate": "2005-01-01 00:00:00",
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  "notes": "Bear Stearns branded slide from a DCF Primer document.",
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      "kind": "callout",
      "text": "Enterprise value = (value of the firm if all equity financed) + (value of the tax shield)",
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      "text": "Traditional DCF analysis using WACC assumes a constant capital structure measured by the ratio of debt to equity.",
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      "text": "By definition, changes in the capital structure would change the company's WACC year to year.\nAll else equal, WACC is affected by the tax shield associated with debt financing.\nTherefore, the value of the firm is equal to the value of the entity if all equity financed plus the value of the tax shield.",
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      "text": "Step 1: Discount unlevered free cash flows at the company's cost of equity.",
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      "text": "Step 2: Calculate the tax shield.\nEstimate tax shield by multiplying interest expense by the company's marginal tax rate.\nDiscount the tax shield at the company's after-tax cost of debt.",
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      "text": "When a company's capital structure changes over time (i.e., an LBO), it is inconsistent to apply the same WACC to period cash flows.",
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      "text": "The adjusted net present value takes into consideration changes to the capital structure without having to adjust the company's WACC each year.",
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      "text": "Adjusted Net Present Value",
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