A Practitioner’s Guide to Three Values for One Company, and the Arithmetic of the Gap
Julian R. Sterling
These are the companion files of Business Valuation by Julian R. Sterling.The book on Amazon →
The four Excel workbooks that go with the book, corrected and completed where they fell short of what the book
promised: every printed figure is reproduced by a live formula, and each workbook ends with a Checks sheet,
189 controls in all, every one PASS. Around them: the same four models with the inputs emptied, thirteen
working documents to print, forty questions that mark themselves, and three cases the book names and never takes to
a number. Nothing is locked, protected or watermarked.
Free to download. No sign-up, no email address, nothing to fill in.
Eleven workbooks, the printable documents and the read-me. Each group below can also be
downloaded on its own. Last revised 24 September 2026.
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These carry the book’s own figures, so that every number it prints can be traced to a live
formula. Each closes on its checks sheet.
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Chapters 1, 7, 9, 11 and 13
Cawdrey — the three values
All three methods on one set of facts, so the spread between them is a computed quantity
rather than a picture. The discounted cash flow at 73,060,585, the comparable
set at 8.20x giving 68,880,000, the transaction set at 10.40x giving
87,360,000, and a gap of 18,480,000, or 26.8 per cent of the
lowest. The bridge to equity value is run for each, so the three appear in the currency the
seller actually cares about as well as in enterprise value: 14.42, 15.47 and 19.04 a share, and a
gap of 32.0 per cent in equity against 26.8 in enterprise value, because leverage magnifies it.
Then the line the book is built on. Each of the three values is put back into the same model
at the same cost of capital, and the perpetual growth rate that would produce it is solved for:
1.44, 2.00 and 3.41 per cent. The entire
26.8 per cent spread is 1.96 points of growth — and once it is stated
that way it becomes a disagreement about the world rather than about method.
The five-year build line by line, with year one taken apart from revenue through EBITDA, tax,
depreciation, capital expenditure and working capital to a free cash flow of 4,664,000, and
every ratio held as an input rather than typed into a formula. Change the margin and the whole
forecast moves; change the capital intensity and it moves differently.
The terminal value has its own block, and its share of the answer —
72.78 per cent — is on the page rather than buried, because that is the
number a reviewer should see first. The sensitivity grid runs the cost of capital from 8.0 to
10.0 per cent against growth, and reports the finding of Chapter 8: two hundred basis
points move the value 21,578,578, which is 1.17 times the
entire spread between the three methods. The argument everyone has in the room is smaller than
the one nobody has.
Revised: the ranking of Chapter 8, which the book and this workbook’s read-me promised, was not
in the file. It is now, in live formulas, and it corrects three rows of the book’s table. A point of
margin either way spans 11,955,368, not 11,278,000; 100,000 a year of capital expenditure
or working capital spans 2,672,016, not 3,133,000; a point of tax 2,258,236, not
2,130,000. The order does not change. The cost of capital is built line by line with a basis on every
input, and the terminal value has its own sheet.
The peer set and the transaction set with their medians, their quartiles and the effect of
dropping any one name, so the fragility of a five-company median is visible rather than
asserted. Type a sixth peer in and watch the enterprise value move.
The second half is the test of Chapter 12, and it is the sheet most worth running on your
own numbers. The 26.8 per cent control premium is converted into the perpetual after-tax cash
flow it requires — 1,293,600 a year — and then into the pre-tax figure a management
team would actually have to deliver: 1,724,800 every year, for ever, which is
20.53 per cent of the target’s entire EBITDA and 3.59 per cent of its
revenue. A percentage is a feeling. That is a test somebody either passes or fails.
Revised: the quartiles, the drop-one medians and the sixth peer this page described are now in the
file. So is Chapter 10 (52.38 per cent conversion, 7.63x at steady state, the same prices on free
cash flow, EBIT and revenue), what a reported deal multiple hides, and the premium delayed three
years (2,233,667 a year) or a third attributed to tension and a recovered discount (1,149,867).
The reverse solve, in closed form rather than by goal seek, so it recomputes the moment you
type. Enter any enterprise value and read the perpetual growth rate that would produce it,
holding the forecast and the cost of capital fixed; or hold growth and read the cost of capital
instead (9.42, 9.00 and 7.87 per cent), or the steady margin the price needs (19.89 per cent at
10.40x). Revised: the cost of capital solve was missing, and the two medians were typed into the
formulas as constants; both are fixed. The identity is on the sheet:
g = (K × WACC − FCF5) / (FCF5 + K), where K is the terminal value the
target price implies, rolled forward.
The last sheet follows the money to the seller. A headline equity value of 76,160,000, disposal
costs, a tax base and a capital gains rate produce 64,109,440 —
15.8 per cent below the headline, and equivalent, put back through the bridge,
to 8.97x. A little above the 8.70x of the discounted cash flow the seller
was offered before the negotiation began. The tax assumptions are inputs and are the
case’s own; replace them with your jurisdiction’s and the conclusion is still there.
The four workbooks with every input emptied. The checks sheets count what is still missing and test what holds for any inputs.
All four workbooks
Your company, your plan, your peers
The same formulas with every input emptied: the company, the plan and the rate, the peer and transaction sets, the cost-of-capital build-up and the seller’s tax. The sensitivity steps and the ranking moves stay.
The book’s inputs are listed in a text file inside the archive. Type them back in and the book’s figures come back with them: 73,060,585, 1.44 and 3.41 per cent, 64,109,440.
Thirteen pages to print and use. A4, with margins wide enough for US Letter.
Chapters 2 to 18
Thirteen working documents
Page one of the valuation: the answer, the question it answers, and the assumption that moves it. The bridge, dated and item by item. The forecast claim by claim, with the four steady-state tests. Free cash flow line by line. The cost of capital built, with a basis and a date on every line. The terminal value on its own line. The sensitivity ranked, with the coherent diagonal. The comparable set argued. The precedent transactions rebuilt. The control premium as a synergy register. The reverse solve and the honest range. The seller’s net proceeds. What the valuation does not contain, and the five questions to attack one.
A workbook that marks itself. Answer in the yellow cells; the marking fills in as you go.
All parts of the book
Forty questions on the book
Six on values and vocabulary, nine on the discounted cash flow, nine on multiples and the premium, six on the reconciliation, five on the seller and what the model cannot see, and five on the three cases below. Numbers are marked to a tolerance, multiple choice to the letter, and the score sheet counts your errors part by part: that is your revision list.
Nothing is hidden. The marking sheet holds every answer, every tolerance, and the reason for each answer.
New material, not a restatement. Three situations the chapters name and never take to a number. Each case is one workbook: the note is the first sheet, the model is the rest, and a checks sheet closes it.
Chapter 17 · Case one
Three scenarios, or fifty basis points?
The concentrated customer lost in year two, priced in the cash flow at the same rate. With the customer at 20 per cent of revenue and a 35 per cent contribution margin (ADDED), Cawdrey is worth 39,607,674 without it. Weighted 20, 65 and 15 per cent, the three scenarios give 68,727,900; the fifty-basis-point fudge gives 68,129,031. Close numbers, different documents: the fudge is a 21.8 per cent chance of losing the customer that nobody wrote down.
Chapter 16 · Case two
10.40x with a quarter deferred, or 9.80x in cash?
The question Chapter 16 asks and leaves to the bridge. On paper the deferred offer nets 64,109,440 against 60,158,080. Discounted at 12 per cent with a 90 per cent chance on each instalment (ADDED), it is worth 59,630,584 today: an all-cash 9.72x, below the 9.80x on the table. It wins only above a 94.1 per cent chance of payment, or below a 15.6 per cent rate if payment is certain.
Chapters 3 and 13 · Case three
The financial buyer’s ceiling
Chapter 3 says a financial buyer’s ceiling is set by the return he must earn; Chapter 13 says his exit multiple carries the answer. With 4.5x debt at 7 per cent and a 20 per cent target (ADDED), paying 10.40x and selling at the trading 8.20x earns 6.4 per cent; it needs a 13.40x exit. His ceiling is 7.73x, below even the trading median: the 10.40x has to come from a trade buyer’s synergies.
an input cell; everything else on the sheet is a formula
Black text
a formula — do not overtype these
Checks sheet
the printed figure beside the computed one, with a PASS or a FAIL; the blank set and the cases end ALL OK
ADDED
a figure the book does not give, used in the cases and marked wherever it appears
Why the checks matter more than the models
A workbook that agrees with a book proves nothing on its own — the author wrote both. What
the Checks sheets do is different: they force the model to reproduce a number that was printed
before the model existed, from a formula rather than from the number itself.
On this book the discipline mattered most in workbook 4. The reverse solve is the argument of the
whole text, and it is the one place where an iterative answer would have been easy and unfalsifiable.
Writing it in closed form meant the three implied growth rates had to fall out of an identity
rather than out of a search — and the identity had to reproduce 2.00 per cent exactly when
fed the model’s own enterprise value, which is the only check that could have caught an
error in it.
Rebuilding the ranking the book promised is also what caught it. Three rows of the Chapter 8 table
were computed from a shortcut that mixed base-year figures with year-one cash flow; the full model
moves differently, and the controls now say so beside the printed number.
Where the book uses an assumption rather than a fact — the 2 per cent disposal cost, the 20
per cent gains rate, the 22,000,000 tax base — the workbook carries it as an input on the
Inputs sheet and says so. None of them is a statement about any jurisdiction.
Go beyond the companion files
Business Valuation develops the complete framework behind these models, with the assumptions, trade-offs and worked examples tied together.
The workbooks open in Microsoft Excel, LibreOffice Calc, Google Sheets and Numbers; the PDF
prints on A4 or US Letter. They use no macros and no add-ins, so nothing needs to be enabled or trusted. If your spreadsheet asks
to update links on opening, decline — there are none.
What changed, and when
24 Sep 2026
The four workbooks completed and checked: 189 controls, every one PASS. The ranking of Chapter 8, promised and missing, added: it corrects the margin row (11,955,368, not 11,278,000), the capital expenditure and working capital rows (2,672,016, not 3,133,000) and the tax row (2,258,236, not 2,130,000). The cost of capital solve added to workbook 4 and the typed-in medians made live; the quartiles, drop-one medians and sixth peer added to workbook 3. Added: a blank set, thirteen working documents, forty questions that mark themselves, and three cases.
How much does the mid-year convention add to a DCF?The square root of (1 + WACC), minus one: 4.40 per cent at 9 per cent. Shifting only the forecast years adds 1.20 per cent; the perpetuity adds the rest.
How do you do a sum-of-the-parts (SOTP) valuation?Value each segment on its own multiple, then deduct central costs, debt and minorities: 650.0m of segment value becomes 9.22 a share, a 13.2% conglomerate discount.
How do you handle a stub period in a DCF valuation?Value only the cash flow still to come and shift each period by the stub. At 30 September the stub is 0.25 years; using the full year overstates EV by 4.0%.
Closing the DealTwo defensible bridges 20.70 million apart, a peg worth 7.00 million, and the six choices that remove 6.60 of a 12.00 earn-out.
CMBS and CRE CLOsWhere the loss actually lands, from appraisal reduction to realised severity, and what the B-piece is really being paid for.
How to Read a Commercial LeaseThe three refinements chapter 19 names and never performs, and the renewal rate below which the mark-to-market is worth nothing.
How to Read a Credit AgreementWhere the default actually comes from, the cure that costs 5.5 times the other, and the capacity nobody adds up.
How to Read a Real Estate Loan AgreementThe cure ratio in closed form, the four-point window in which the cheap cure works, and the cure sized to the wrong threshold.
Office Real EstateA six per cent yield that returns 3.2 per cent once the re-letting cycle is paid for, and the headline-to-net-effective rent arithmetic.
Private Equity Real EstateBoth worked waterfalls to the dollar, the two capital stacks, and the arithmetic of the promote made changeable.
Private Markets PerformanceThirty-one of the thirty-three figures chapter 19 publishes reproduce exactly — and the two that do not are named rather than quietly adopted.
Raising a Real Estate FundThe chapter 17 funnel run on a calendar — when the first close actually lands, and why more travel does not help.
Real Estate FinanceFour people look at one building and reach four numbers; the lender is whole only above 105,109,489, twelve per cent below today’s value rather than forty.
Real Estate Financial ModelingProperty, development and fund models built line by line, and the modelling test worked end to end.
Real Estate Fund ManagementThe waterfall of 6.11, the build-to-core of 8.7 and the proceeds gap, reproduced as live formulas rather than asserted.
REIT Analysis and ValuationFFO of 532.0, AFFO of 381.0, net asset value and dividend safety — every figure a formula you can change.
Retail Real EstateThe occupancy cost of every unit in a centre, the sixteen per cent of the rent roll no tenant can sustain, and the right-size-convert-or-hold decision priced.
Sale and LeasebackA €179.5 million transaction end to end, with rent cover measured on the entity that actually signs the lease.
Self-Storage Real EstateThe cohort engine behind a 590-unit store, and the rate increase on existing customers priced against the move-outs it causes.
The Fund Finance ProfessionalChapter 8 builds the reported-to-eligible NAV bridge; chapter 9 computes every ratio without it. Two points at every state — and what a subscription line does to the IRR.
The Growth Equity InvestorWhat a pro rata cheque really costs, and the band where defending your ownership loses money.
The Private Credit InvestorThe two coverage ratios are not measured on the same thing: the erosion is 47.7 per cent, not the 28.7 the headline implies.
The Private Equity Fund Controller PlaybookThe book defines IRR, DPI, RVPI and TVPI, tells you to update them at the exit, and prints not one value. Computed: a 1.833× deal inside a fund at 0.892 TVPI.
The Venture Capital AssociateWhat defending a position costs, and how many companies a reserve pool actually defends.
Financial Risk ManagementA fund inside every limit that cannot meet a redemption — and the number that decides it is the one with no currency attached.
Quantitative FinanceThree models agree to a quarter of one per cent about a number that one unobservable input moves a hundred and three times as much.
Asset ManagementFour people quote four returns for one mandate, all correct and 2.7017 points apart — forty-eight times the manager’s net skill.
Alternative InvestmentsA manager reports 13.29 per cent and the endowment earns 6.26 — both correct, and only a third of the advertised advantage arrives.
Credit AnalysisFour defensible EBITDAs on one borrower give leverage from 3.19x to 6.47x — and the add-back argument is fifty times the covenant headroom.
Venture CapitalOne company out of twenty-eight returns 56.7 per cent of the fund, and half the capital goes in after the decision — at half the return.
Machine Learning for FinanceFive people quote the accuracy of one credit model, all five are right, and the number that decides how much money it makes is none of them.
Commercial Real Estate InvestingThe equity earned 8.6647 per cent and the investor received exactly 8.0000 — the preferred return, and nothing above it.
Mergers and AcquisitionsThe board paper says the deal creates 13,436,667 of value. The arithmetic says it destroys 17,530,855. Nobody is lying.
DerivativesThe treasury report says the hedge cost 1,233,698. That is the interest differential, not a cost.
Treasury ManagementFive cash balances for one company, all correct and 145,600,000 apart — and the revolver that is two-thirds of the liquidity leaves at a revenue fall of 8.4127 per cent.
Financial Planning and AnalysisRevenue 3.0190 per cent above budget and operating profit 16.3209 per cent below it, in the same quarter, with every figure correctly stated.
Energy TradingA position report that is 91.7031 per cent hedged and correctly computed, on a book that is short 2,542,000 MWh — and a margin call of 198,400,000 the next morning.
Construction Cost ControlA contract sum of 26,301,102 became a final account of 29,153,363 on the building that was drawn — and 85.8 per cent of what was lost was knowable on the day it was signed.
Trade FinanceSix routes to payment on one 4,200,000 export order cost between 178,040 and 223,268, a spread worth 14.8 per cent of the margin, and a day of buyer credit costs 1,031.76.
Cost AccountingOne factory costed twice on the same 13,440,000 of overhead, and 4,053,091 moves between four product families.
Pricing StrategyA list price of 148.00, a pocket price of 112.51, and the nine deductions in between — with what one point of price is actually worth.
Contract ManagementA bid 5.50 a unit cheaper, signed on paper worth 9.81 a unit more — and 94.68 per cent of it was knowable on the day of signature.
Capital MarketsFour defensible readings of one bond, the cost of an issue under each convention, and the placement discount computed at a constant discount.
Financial RegulationThree ratios pass and the fourth is in breach by 1,956.0 million: the output floor, the liquidity buffer after encumbrance, and the loan split.
Bank ManagementFour defensible readings of one balance sheet, the deposit beta measured two ways, and the liquidity that lasts 3.9 days.
The Real Estate WorkoutFour ways out of one broken loan, discounted to today, and the 58.7 cents at which a payoff beats enforcement.
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