FEHBA assigns to OPM responsibility for negotiating and regulating health-benefits plans for federal employees. See

684

*6845 U. S. C. 8902(a). OPM contracts with carriers, FEHBA instructs, "shall contain a detailed statement of benefits offered and shall include such maximums, limitations, exclusions, and other definitions of benefits as [OPM] considers necessary or desirable." 8902(d). Pursuant to FEHBA, OPM entered into a contract in 1960 with the BCBSA to establish a nationwide fee-for-service health plan, the terms of which are renegotiated annually. As FEHBA prescribes, the Federal Government pays about 75% of the premiums; the enrollee pays the rest. 8906(b). Premiums thus shared are deposited in a special Treasury Fund, the Federal Employees Health Benefits Fund, 8909(a). Carriers draw against the Fund to pay for covered health-care benefits.Ibid.;see also 48 CFR 1632.170(b) (2005).

51. Does the book value of the debt always coincide with its market value?

52. Is the Free Cash Flow (FCF) the sum of the equity cash flow and the debt cash flow?

53. What is NOPAT (Net Operating Profit After Tax)?

54. What is EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization)?

55. I do not understand the meaning of Working Capital Requirements. I think it should

be similar to Working Capital (Current Assets - Current Liabilities). Am I right?

56. Why can we not calculate the required return (Ke) from the Gordon-Shapiro model

[P0 = Div0 (1+g) / (Ke - g)] instead of using the CAPM? As we know the current

dividend (Div0) and the current share price (P0), we can obtain the growth rate of the

dividend from the formula g = ROE (1-p)/(1 - ROE (1-p)), p being the payout.

57. Assume I calculate g as ROE (1-p)/(1-ROE (1-p)) and the Ke from the CAPM. I replace

both values in the formula PER = (ROE (1+g) - g)/ROE (Ke-g) but the PER I obtain is

totally different from the one I get by dividing the quotation of the share to the

earnings per share. Is it possible to interpret that difference as an overvaluation or

undervaluation of that share on the market?

58. I was assigned a valuation of the shares of a pharmaceutical laboratory. Which

valuation method is more convenient?

59. I need to know how to value a company well, but I cannot clearly see the valuation

process of a company starting from its past income statements. What are the

systematical steps I need to take? Firstly, I think I should elaborate the provisional

statements for the following fiscal years and then calculate the cash flows, discount

them at the present moment (with a discount factor), add the terminal value to it and

the difference between the book net value and the market value of intangibles. I really

need that these steps be methodical and easy to understand so I can use them as a

guide when valuing a company.

60. What is a 3 x 1 Split?