Financial studies mainly include three types of studies:
Financial Feasibility Studies;
Financial Valuation Studies;
Quantum Expert Reports for Legal Arbitration.
1. Financial Feasibility Studies:
Financial feasibility studies aim at assessing the viability and sustainability of investing in a project. In this respect, the financial feasibility study aims at testing the financial viability, indicating the financial bottlenecks and proposing the appropriate financial structure of the project on the basis of market and technical data.
This is accomplished through formulation of relevant financial statements, i.e. proforma income statement and cash flow statement, for a number of years in the future, and identification and analysis of the appropriate indicators, mainly;
Internal Rate of Return (IRR);
Net Present Value (NPV);
Pay Back Period (PBP).
Both the profitability and liquidity position of the project are carefully analysed and the expected risk to be incurred by the project is assessed through estimation of discount rate (i.e. Weighted Average Cost of Capital, WACC), incorporating political, economic, business and specific risk.
Sensitivity analysis is also conducted to test the degree of risk that the project may take, in that different scenarios are undertaken to test the extent of the project’s sensitivity to changes perceived in the future.
2. Financial Valuation Studies:
Financial valuation studies aim at arriving at the fair market value of companies as going concern. It implies conducting a financial valuation study on the basis of the widely-used valuation method: the Discounted Cash Flow (DCF). Hence, it relies on future cash flows and the residual value of the firm (i.e. value of firm at the end of the projection period to reflect the infinite life of the project).
Future cash flows and residual value required are discounted at the appropriate return required for such project (on the basis of prevailing capital structure), i.e. Weighted Average Cost of Capital (WACC), to arrive at the fair value of the company. This is in fact the present value of the company, i.e. the value of business as going concern.
3. Quantum Expert Reports for Legal Arbitration:
HLB Egypt-Makary Consulting possesses extensive experience in conducting expert reports for the purpose of legal arbitration where these reports aim at assisting legal firms in their arbitrage cases through the following:
Reviewing the validity of the financial relief sought and estimating compensation resulting from the breach and termination of agreements;
Arriving at the fair value for specific fees in order to indicate their relevance in light of applied norms in similar contracts in order to provide an informative decision before negotiations with the opponent;
Assisting the legal firm in its confrontation in front of international court through providing financial estimates and judgments to the task at hand in order to arrive at the fair value for compensation.
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