Lesson 7 of 11 · All lessons in this module
  1. Disaggregated models: why and how to build a forecast valuation model
  2. Forecasting revenue: top-down, bottom-up and non-recurring items
  3. Forecasting operating costs: COGS, SG&A and segment margins
  4. Expense models: regressions, itemized costs and margin assumptions
  5. Working capital, capital investments and capital structure
  6. Asset and financing models: investment, financing needs and FCFE
  7. Integrated cases: a regional revenue build and richer financing assumptions
  8. Scenario analysis: risk factors, cost structure and sensitivityVideo lesson
  9. Matching the model to the company: life cycle, distress and control
  10. From forecast statements to equity value: FCFF, terminal value and scenarios
  11. Integrated case: from assumptions to equity value, step by step

This lesson is part of the 2027 curriculum. You are following the 2026 curriculum, where it is not taught in this form. Switch if you are sitting the exam under the 2027 curriculum.

Lesson 7 of 11 · 16 min

Integrated cases: a regional revenue build and richer financing assumptions

A top-down revenue forecast by region multiplies market growth by share change and then units by revenue per unit; richer financing assumptions (a target debt ratio, interest on opening balances) change net income and FCFE but leave FCFF alone.

In short

  • Regional unit growth = (1 + market growth) × (new share / old share) − 1; revenue = units × revenue per unit, summed over regions.
  • Rebuild the market size from last year's units and share before applying growth and the new share.
  • A target debt ratio on total assets pins debt to the balance sheet; cash is the balancing figure.
  • Use opening balances for interest expense and income: it avoids circular calculations.
  • Richer financing assumptions change net income and FCFE, not FCFF; report the effect of each change on the valuation separately.

Unlock this lesson free for 7 days

Create a free account to get 7 days free: every lesson, video and flashcard, and the question bank. No card needed.

Start your 7-day free trialLog in