AFMP4
Syllabus B. Advanced Investment Appraisal B4. Valuation and the use of free cash flows

B4a. Market Capitalisation 2 / 11

Syllabus B4a)

Apply asset based, income based and cash flow based models to value equity. Apply appropriate models, including term structure of interest rates, the yield curve and credit spreads, to value corporate debt.

This is very straightforward and is often referred to as “Market Cap”

It is calculated as follows:

Share Price x Number of shares

Illustration

Share Price 96c
Share Capital (nominal value 50c)  $60million

Solution

96 x (60/.5) = $115.2 million