Question

I am valuing a pharmaceutical company KrKa .. My problem is as follows:

1. I can not decide on the right DCF model regarding the valuation, should it be FCFE or FCFF.

2. The company is KrKa group, the owner of the parent is KrKa d.d slovenia, the group in itself is spanned geographically across Europe, Russia, and U.S. On the companies financial statement, appear both the KrKa's and the group's financials.

- How do I go about bringing together the two financial statements, as I am supposed to Value KrKa company

Thank you in advance

Answer 1

1.- You should be the same result under FCFE or FCFF. I prefer FCFF. Works better to compare with ratios like EV/EBITDA.

2.- I think is better if you used the consolidated financial statements. That's because you value the total assets of the firm... but you must rest the minority interest.

Answer 2

When u are using FCFF then use discounting factor WAAC, and when u are using FCFE the use kost of equity