Private Project Evaluation and Business Valuation

This module lays the foundation that will allow participants to have a clear vision of the concepts of price and economic value and how the latter can be estimated.

1. Time value of money.
2. Valuation through discounted cash flows.
3. Application to valuation of bonds and stocks.

The model used for private project evaluation is discounted cash flow (DCF). Therefore, in this module we will review the main theoretical and practical concepts of this model.

1. Financial fundamentals for project evaluation using the cash flow method.
2. Preparation of the different cash flows for project evaluation, such as the economic cash flow and the financial cash flow.

Estimating the discount rate for cash flows is essential for valuing an investment. Therefore, this module focuses on determining the opportunity cost of capital (OCC), the cost of debt, and consequently, the weighted average cost of capital (WACC).

Likewise, the main profitability indicators used for private project evaluation and the relationship of these indicators with the WACC are studied.

1. Cost of equity (COK) and cost of debt.
2. Weighted average cost of capital (WACC).
3. Profitability indicators: NPV, IRR, PR.
4. Relationship between WACC and profitability indicators.

It is also important to assess the potential variations in the estimated results due to any changes in the project variables. Therefore, a project risk analysis is recommended.

1. Identifying relevant or critical assumptions for a project.
2. Project sensitivity analysis.

After reviewing the reasons that would lead to valuing a company, the main methodologies for valuing companies are reviewed, including:

1. Discounted cash flow.
2. Relative valuation (multiples).
3. Liquidation value.

In addition, this module will include case studies of valuations of Peruvian companies.