exactly. it’s quite possibly the scariest little section of the whole L2 text.
will i know it all step by step? doubt it. i have made notecards on the following stuff though-
1. free cash flow formula/calcs- this overlaps SS12 anyways, need to know
2. (1+nominal WACC) = (1+real WACC) ( 1+inflation)
3. real and nominal continuing value formulas
4. basic knowledge about ratios- in general, ratios based on real terms are accurate, nominal tend to get messed up. does say that net working capital/revenues wind up same ratio using both methods, there was a concept schwes’ concept checker that reinforced this ratio stuff.
5. adjust cash flows rather than discount rate to account for emerging mkt risks
(know also the reasons why- country risks are diversifiable, etc)
6. cost of capital for emerging mkt countries- just looking at the WACC formula and learning some of the adjustments that an analyst should make like RFR using the 10 yr us govt bond yield + (local inflation - US inflation).
those are my basic takeaways- keep nominal with nominal, keep real with real…
as for the MASSIVE 7 page jobby, i cannot imagine that an item set would make you do that all out. i certainly hope not because i will poke my eye out with my mechanical pencil and freak out in the test center if it happens.
as we study, if anyone sees good questions on this stuff in qbank or wherever, we should review it. i think WHOOOOOAAAAA is the general consensus on this LOS though. i’m right there with you.