Valuation

[mubashshir]

hi all..need your opinions..i am working on a business valuation of an educational institute..now this institute has a land which it owns and on which the institute is built. the market value of land is around 2 crore. When i make a forecast from its CF and discount, the value of the business turns out to be around 2.5 crores. In the Income statement no rent is charged since the institute owns the land, therefore i understand that it is implied that the land is included in the valuation of 2.5Cr. However i economically feel that the value of the institute must be higher since the land itself is valued at 2Cr. How should i go about it? any way in which i may value the business separately (without the land) and add the value of land later on?

 

[mubashshir]

anyone?

 

[samueldrake22]

Hello,
You should valuate the assets of the institution like building, furniture etc. and the cash flow to the institution and some other factors to valuate your insstitution business.
Thnks……………

 

[MrSmart]

There are two ways you can go about doing it.
1) A DCF model for the operating assets of the insititute, then you add the market values of all the remaining non-operating assets (like land) to get the total value.
2) A relative valuation for the operating segment on the company (eg. EV/EBITDA) compared to other companies in the same peer group.
The assumptions in both have to be consistent. You can remove the effects of the land on beta in your institute, and other institutes as well (since land has a beta of 0). To get a better feel for the the unbiased risk of all your comparable companies.