Equity Bridge

​

Equity bridge in lib/dcf_engine.py

​

The bridge

Operating value of the firm (PV of FCFFs + PV of terminal value)
− Book value of debt
+ Cash and marketable securities
− Minority interests
− Employee options value (from option_value.py)
× (1 − failure probability) (from failure_rate.py)
÷ Shares outstanding
= Estimated value per share

​

Key function

​

equity_bridge()

• operating_value — present value of the firm (from discounting)
• debt — book value of debt
• cash — cash and marketable securities
• minority_interests — minority interest claims (if any)
• option_value — total employee option value (from option_value.py)
• failure_probability — probability of corporate failure (from failure_rate.py)
• distress_proceeds — recovery value in failure scenario
• shares — shares outstanding

​

Related modules

• option_value.py — dilution-adjusted Black-Scholes for the option deduction
• failure_rate.py — probability of failure for the distress adjustment