Corporate and Project Finance Modeling: Theory and Practice (Wiley Finance)

Corporate and Project Finance Modeling: Theory and Practice (Wiley Finance)

Language: English

Pages: 624

ISBN: 1118854365

Format: PDF / Kindle (mobi) / ePub


A clear and comprehensive guide to financial modeling and valuation with extensive case studies and practice exercises

Corporate and Project Finance Modeling takes a clear, coherent approach to a complex and technical topic. Written by a globally-recognized financial and economic consultant, this book provides a thorough explanation of financial modeling and analysis while describing the practical application of newly-developed techniques. Theoretical discussion, case studies and step-by-step guides allow readers to master many difficult modeling problems and also explain how to build highly structured models from the ground up. The companion website includes downloadable examples, templates, and hundreds of exercises that allow readers to immediately apply the complex ideas discussed.

Financial valuation is an in-depth process, involving both objective and subjective parameters. Precise modeling is critical, and thorough, accurate analysis is what bridges the gap from model to value. This book allows readers to gain a true mastery of the principles underlying financial modeling and valuation by helping them to:

  • Develop flexible and accurate valuation analysis incorporating cash flow waterfalls, depreciation and retirements, updates for new historic periods, and dynamic presentation of scenario and sensitivity analysis;
  • Build customized spreadsheet functions that solve circular logic arising in project and corporate valuation without cumbersome copy and paste macros;
  • Derive accurate measures of normalized cash flow and implied valuation multiples that account for asset life, changing growth, taxes, varying returns and cost of capital;
  • Incorporate stochastic analysis with alternative time series equations and Monte Carlo simulation without add-ins;
  • Understand valuation effects of debt sizing, sculpting, project funding, re-financing, holding periods and credit enhancements.

Corporate and Project Finance Modeling provides comprehensive guidance and extensive explanation, making it essential reading for anyone in the field.

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volatility parameter is magnified after high prices are reached. This mathematical effect does not necessarily represent how the input variables in your financial models really work. If prices of commodities or other products would really reach the extreme values in actual markets, the prices would prompt responses by consumers or suppliers that would effectively put upper and lower limits on the prices. In the case of low prices, limits occur because producers will cease production when prices

of these CDOs were famous for relying on complex statistics like coplets, which were all but impossible to interpret. The outputs of fancy statistical analysis were sold as really representing economic behavior, and sophisticated models that measured value at risk and the probability of default gave people a false sense of comfort that they could take risks that in hindsight turned out to be ridiculously underestimated. By working through the financial modeling mechanics in this part of the

on invested capital is: This alternative definition of ROIC using the asset side of the balance sheet can be helpful in corporate models because it can be computed before the financial structure of the model is developed. The calculation requires EBITDA, capital expenditures, working capital, and depreciation to derive NOPAT and net assets. The net assets that generate EBITDA include items such as net working capital and net plant assets, which are part of the free cash flow development of a

interest deductions; OP, other principal payments; and SI, subordinated interest expense. The derivation process for arriving at the equation is similar to the process for establishing the equation in the previous section. Needless to say, implementing this equation in a backward induction process would be painful because of the length of the equation. Even if you put this very long formula into your model with backward induction, there is a remaining issue with the method that continues to

the same, and the spreadsheet page is separated between the precommercial phase and the postcommercial stage. To model a portfolio of projects you should generally define the key time periods for different individual projects. A portion of the input page is shown in Figure 47.1 with various dates. The temporary occupation permit (TOP) date shown for each project is analogous to the commercial operation date in project finance. In Figure 47.1 the construction start date and the TOP date is not at

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