FAQ

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THEORY

Q: Integrating EBITDA and discounted-cash-flow (DCF) and unifying their valuations seems very intriguing and helpful. What exactly is going on here? 

A: Today there are two distinct solution methodologies to generate investment valuations. EBITDA uses the reciprocal triad method and DCF uses IRR( ) and NPV( )'s iterative sigma method. The IRR/NPV iterative sigma valuation method worked adequately until the early 2000s when investments with increasing levels of deferred upside operating performance became more prominent (thus, more acceptable—think dot.com). Deferred upside operating performance converged with increasing levels of debt financing. The convergence of increasing investment deferred upside performance and debt levels creates a void in DCF valuations. The DCF void is now being partially filled with EBITDA valuations. However, opaque EBTDA Multiples present their own problems due to their lack of transparency. Peer Inside Any EBITDA Multiple is addressing the EBITDA Multiple transparency and lack of validation issues. For more about EBITDA's lack of validation issues see Top Reasons.

Q: How do I know Peer Inside's valuation methodology is truly fixing today's valuation issues?  

A: Unlike today's EBITDA and DCF valuations, Peer Inside's valuation methodology generates corroborating investment valuations. Corroborating investment valuations demonstrate their prospective debt entries equal credit entries by providing the fourth primary equity statement, not just today's three prospective financial statements.

PRACTICE

Q: What if my initial EBITDA amount is negative?

A: If your initial EBITDA amount is negative the investment methodology associated with Peer Inside is not the correct investment methodology for you. Contact us and we will send you the correct investment methodology. 

Q: Do IRR Hurdle Rates remain a financial metric?

A: IRR Hurdle Rates are now moot. An investment opportunity's prospective return prior to the investment and the expected return after the investment is made are the same. There are no longer any differences. 

TECHNICAL

Q: For tabs (#1) Peer Inside Any EBITDA Multiple and (#3) Calculate a Multiple Growth Rate, why is it necessary to provide guesses to the valuation solution being sought? . . . and then use a macro to complete the solution? There is no need to provide guesses and macros in tabs (#2) Build a Custom EBITDA Multiple and (#4) Determine a Period One EBITDA Amount. 

A: Peer Inside's present value of a growing annuity formula simultaneously impacts both Equity Return and EBITDA Growth Rate iterative polynomial assumptions. Tabs (#1) and (#3)'s valuations contain a combined segment of Equity Return and EBITDA Growth Rate assumptions. The segment simultaneously solves both exponential assumptions. Even an electronic spreadsheet's IRR(values, [guess]) single exponential function may require an occasional guess for the function to generate solutions. Peer Inside's double exponential function requires considerable more manual intervention than IRR( )'s single exponential to find a double exponential solution.  

For tabs (#2) and (#4), exponential Equity Return and EBITDA Growth Rate are both given assumptions and therefore, both are never being solved simultaneously.