Summary of key results · M06 Valuation

Result	Formula
Linking identities	$A = L + E$ ; $E_t = E_{t-1} + NI_t - d_t$ ; $NOA = ND + E$
FCFF	$\text{NOPAT} + \text{D\&A} - \text{Capex} - \Delta NWC = \text{NOPAT} - \Delta NOA$
FCFF to claimholders	$\text{FCFF} = Int(1-\tau) - \Delta ND + d$ ; $\text{FCFE} = d$
Growing annuity	$\dfrac{c_1}{r-g}\big[1 - (\tfrac{1+g}{1+r})^n\big]$
Growing perpetuity / Gordon	$c_1/(r-g)$ , $r > g$ ; $k_e = D_1/P_0 + g$
Two-stage DCF	(6.9), TV$_N = F_N(1+g_T)/(W - g_T)$
Sustainable growth	$g = RR \times \text{RONIC}$ ; $g_{EPS} = b \times ROE$
Value driver	$V = \text{NOPAT}_1(1 - g/\text{RONIC})/(W - g)$
Growth creates value iff	$\partial V/\partial g \propto 1 - W/\text{RONIC} > 0 \iff \text{RONIC} > W$
CAPM	$\mu_i - r_f = \beta_i(\mu_M - r_f)$
India CoE	$k_e = (y_{G\text{-}sec} - DS) + \beta(\text{ERP}_{mature} + \text{CRP})$ ; Jul 2026: DS 1.75%, CRP 2.72%, ERP 6.92%
WACC	$\frac{E}{V}k_e + \frac{D}{V}k_d(1-\tau)$
Justified P/E	$P_0/E_1 = (1 - g/ROE)/(k-g)$ ; $P_0/E_0 = p(1+g)/(k-g)$
Justified P/B	$(ROE - g)/(k - g)$
Reverse DCF	unique root of $V_0(g) = V^{mkt}$ ; value driver: $g^* = (VW - N)/(V - N/R)$
Convexity bias	$\mathbb E[V(W)] > V(\mathbb E W)$
Statistical margin of safety	buy iff price $\le q_\alpha(V)$
Beneish	(6.19); flag if $M > -1.78$
Piotroski	nine binary signals, $F \in \{0..9\}$
Coffee Can	revenue growth ≥ 10% and ROCE ≥ 15% in every one of 10 years