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Valuation Models

Valuation Models

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Published by Subhrajit Saha

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Categories:Business/Law
Published by: Subhrajit Saha on Aug 30, 2009
Copyright:Attribution Non-commercial

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11/02/2012

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Aswath Damodaran 
Valuation Models
 Aswath Damodaran
 
Aswath Damodaran 
Misconceptions about Valuation
s
Myth 1: A valuation is an objective search for “true” value
Truth 1.1: All valuations are biased. The only questions are how muchand in which direction.Truth 1.2: The direction and magnitude of the bias in your valuation isdirectly proportional to who pays you and how much you are paid.
s
Myth 2.: A good valuation provides a precise estimate of value
Truth 2.1: There are no precise valuationsTruth 2.2: The payoff to valuation is greatest when valuation is leastprecise.
s
Myth 3: . The more quantitative a model, the better the valuation
Truth 3.1: One’s understanding of a valuation model is inverselyproportional to the number of inputs required for the model.Truth 3.2: Simpler valuation models do much better than complex ones.
 
Aswath Damodaran 
Approaches to Valuation
Valuation Models
 Asset Based Valuation Discounted Cashflow Models Relative Valuation Contingent Claim Models
LiquidationValueReplacementCostEquity ValuationModelsFirm ValuationModelsCost of capitalapproachAPVapproachExcess ReturnModelsStableTwo-stageThree-stageor n-stageCurrentNormalizedEquityFirmEarnings Book ValueRevenues SectorspecificSectorMarketOption todelayOption toexpandOption toliquidatePatent UndevelopedReservesYoungfirmsUndevelopedlandEquity introubledfirmDividendsFree Cashflowto Firm

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