Why should you estimate the value of a bank by employing the equity cash flow method when throughout the text the enterprise DCF models have been stressed?
Answer to relevant QuestionsProvide examples of businesses where network effects would or would not apply. What is the conservation of value principle? Provide some examples of where it might apply. Why is the old way of decomposing TRS (into changes in earnings, changes in P/E, and dividend yield) not the best way to understand a company’s performance? Identify the value drivers embedded in the equity cash flow model. How do the equity cash flow drivers differ from the drivers of the enterprise DCF models? In a bank valuation, the amount of current loan loss provision is not deducted from the DCF result. Why is it then important to analyze the adequacy of the bank’s current loan loss provisions?
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