financial-valuation

name	financial-valuation
description	Use when performing financial valuations, building DCF/LBO models, running Monte Carlo simulations, or analyzing comparable transactions. Provides deterministic valuation framework with strict unit enforcement.

Financial Valuation Methodology

Deterministic Engines (Not LLM-Generated)

OloLand uses validated computation engines for all financial models. Never generate financial model outputs as prose — use MCP tools.

DCF (Discounted Cash Flow)

• Tool: get_dcf_valuation(deal_id)
• Engine: EBITDA → Free Cash Flow projection (5-10 years) → Terminal value (perpetuity growth) → WACC discount
• WACC: CAPM-calculated (risk-free rate + beta * equity risk premium + size premium)
• Sensitivity: Revenue growth rate vs EBITDA margin vs terminal growth rate
• Unit system: StrictFinancialValue — ACTUAL dollars in storage, MILLIONS in calculation, Smart B/M/K in display

LBO (Leveraged Buyout)

• Multi-tranche debt: Senior, Mezzanine, Subordinated, Revolver
• Cash sweep ordering: Revenue → Operations → Debt repayment → Equity
• PIK (Payment-in-Kind) toggle per tranche
• Leverage covenants: Total leverage ratio, interest coverage ratio
• Returns: IRR and MOIC at exit under multiple scenarios

Monte Carlo Simulation

• Tool: run_monte_carlo_simulation(deal_id, num_iterations)
• Vectorized stochastic engine (not loop-bound)
• Distribution support: Normal, LogNormal, Triangular
• Gaussian copula for correlated variables
• Output: Full EV/equity distribution + P5/P25/P50/P75/P95 + VaR/CVaR

Comparable Analysis

• Trading multiples: EV/Revenue, EV/EBITDA, P/E
• Precedent transactions: Recent M&A deal premiums
• Peer selection by industry, size, geography, margin profile

Cross-Document Reconciliation

Before any valuation, verify input data consistency:

• Compare revenue/EBITDA across: CIM, audited financials, management model, tax returns
• Source hierarchy: CPA audited > tax return > management model > AI extracted
• Flag discrepancies > 2% spread
• Use reconciled (highest-confidence) values for models

Risk-Adjusted Valuation

Every valuation must incorporate risk findings:

1. Identify top 3 risks from risk analysis
2. Quantify dollar impact per risk (which line items, how much, when)
3. Adjust base case assumptions accordingly
4. Run sensitivity analysis on risk-driven variables (not arbitrary)
5. Present risk-adjusted range alongside base case