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Business Valuation: Modelling Forecasting Hurdle Rate

Author

Listed:
  • Nangia, Vinay Kumar
  • Agrawal, Rajat
  • Reddy, K. Srinivasa

Abstract

Consolidation, Combination and Diversification (CCD’s) in the emerging globalized market leads to competition and escalating the monopoly power. Given the increasing liberalization of rules, regulations and law, a number of firms are going beyond national borders and making deals triumphant. We suggest an innovative firm valuation model for M&A in the area of Corporate Finance that is NRR Approach 1.0. The methodology is divided into five phases, modeling forecasting hurdle rate, finding sales growth rate, computation of free cash flows & estimation of future free cash flows and finally determination of firm value under NRR approach. The findings suggest that NRR approach considers various imperative factors while valuing target firms for the benefit of shareholders. The value of study could be credited by NRR Approach 1.0. and this is the first of its kind model considers political, transfer and commercial risk factors while estimating hurdle rate. Hence, approach is the first version of development thought and has limited scope to validate in other industries. We believe that NRR model shall be of great help to M&A advisory firms and investment bankers while negotiating deal value in acquisition process. This would be help in exploring new dimensions of judgment and approach for academia as well as for the benefit of target firm shareholders in corporate arena.

Suggested Citation

  • Nangia, Vinay Kumar & Agrawal, Rajat & Reddy, K. Srinivasa, 2011. "Business Valuation: Modelling Forecasting Hurdle Rate," MPRA Paper 60420, University Library of Munich, Germany, revised 2011.
    • Handle: RePEc:pra:mprapa:60420
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    References listed on IDEAS

    as
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    Cited by:

    1. Nangia, Vinay Kumar & Agrawal, Rajat & Reddy, K. Srinivasa, 2011. "Open Offers and Shareholders Earnings – Evidence from India," MPRA Paper 60432, University Library of Munich, Germany, revised 2011.
    2. Reddy, Kotapati Srinivasa, 2016. "Corporate Restructuring in the Asian electronics market: Insights from Philips and Panasonic," MPRA Paper 73663, University Library of Munich, Germany, revised 2016.

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    More about this item

    Keywords

    Business valuation; Mergers; Acquisitions; Hotel & tourism; Forecasting;
    All these keywords.

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • M1 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration
    • M4 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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