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  "docId": "019de06f-28cb-7211-8997-56898cf5fd3f",
  "docSlug": "bfc2c26a8c29fb23775a386134299cd0",
  "documentTitle": "Bear Stearns | Investment Banking Pitch Book | 36 slides",
  "authorId": "bear-stearns",
  "authorName": "Bear Stearns",
  "documentKindSlug": "consulting-deck",
  "documentKindLabel": "Consulting deck",
  "sourceTypeSlug": "investment_bank",
  "sourceTypeLabel": "Investment bank",
  "presentationDate": "2005-01-01 00:00:00",
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  "pageNumber": 7,
  "pageCount": 36,
  "prevPage": 6,
  "nextPage": 8,
  "slideType": "appendix_methodology",
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  "density": "balanced",
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  "notes": "This slide outlines the technical mechanics of DCF valuation, including the treatment of debt, convertibles, and dividend policy consistency.",
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      "text": "Under this approach, FCF to the Firm (“FCFF”) are discounted at the Weighted Average Cost of Capital (“WACC”).\nThe value of the debt can be estimated by the lesser of market value or book value.\nIn-the-money convertibles should not be included as debt for this calculation since they are assumed to have been converted.\nIf the dividend payout ratio changes, operating performance (and cash flows) should also change.\nIf all free cash flows are assumed to be distributed to shareholders, make sure that retained earnings are not double-counted by reinvesting cash.",
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      "text": "The approach of measuring free cash flows to the unlevered firm permits us to ascertain the operating value of a firm independent of its capital structure.\nProvides a greater degree of analytical flexibility.\nThe value of equity is calculated as the value of the firm’s operations less the value of its net debt and other non-equity claims such as preferred stock and minority interests.\nAlternatively, the DCF template is sufficiently flexible to calculate a company’s equity value from the FCF to Common Equity (“FCFCE”) after deducting after-tax debt service, preferred dividends and changes in debt, preferred stock and minority interest. Under this approach, FCFCE are discounted at the Cost of Equity (“KE”).\nIn general, make sure the subject company’s dividend policy is consistent with the discount rate and cash flow assumptions.",
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      "kind": "paragraph",
      "text": "An approach to calculate the unlevered value of the firm is to use after-tax, “debt-free,” nominal Free Cash Flows to the Firm.",
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      "kind": "title",
      "text": "Free Cash Flow Approach",
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      "name": "Discounted Cash Flow",
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      "evidence": "The entire slide describes the DCF methodology and its variants (FCFF vs FCFCE).",
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      "evidence": "The document then delves into the advantages and disadvantages of DCF and cash flow projections, addressing potential complications.",
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