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Table Of Contents

Valuation, Decision Making and Risk
Valuation Overview
Tools for Valuation
Value Comes from Two Things
Valuation and Cash Flow
Valuation Diagram
Capital Ji
r H
The Value Matrix -Stock Categorisation
ROIC Issues
Reasonable Estimates of Growth
Growth Issues
Sustaining Growth and ROIC > WACC
Alternative Valuation Models
Example of Comparing Valuation under Alternative
Risk Neutral Valuation
Practical Implications of Risk Neutral Valuation
Valuation Diagram ±Venture Capital
Venture Capital Method Continued
Replacement Cost
Measuring Replacement Cost
Replacement Value and Tobin¶s Q
Real Options and Problems with DCF
Real Options and DCF Problems -Continued
Fundamental Valuation
Three Primary Methods Discussed in Remainder of
Debt (Bond) Valuation
Risk Free Discounting
Equity ±Dividend Discount Valuation and Gordon¶s
Example of Capitalization Rates
Equity Valuation -Free Cash Flow Model
Practical Discounting Issues in Excel
Valuation and Sustainable Growth
Advantages and Disadvantages of Multiples
Multiples -Summary
Mechanics of Multiples
Valuation from Multiples
Which Multiple to Use
Multiples in M&A
Example of Valuation with Multiples ±Comparison of
Different Transactions
Multiples in Pennzoil Merger ±Comparison of Merger
Consideration to Trading Multiples
Comparable companies analysis data in Banking Merger
Example of Computation of Multiples from Comparative
Comparison with all Acquisitions Since 2001
Adjustments to Multiples
Adjustments to Multiples ±Marketability and iquidity
Studies of iquidity Discount
Adjustments to Multiples ±Controlling Interest Premium
PE Analysis ±Use of PE Ratio in Valuation
Where to Find Data Yahoo Finance.com
Company Profile in website
Price Earnings Ratio
PE Ratio versus EVEBITDA
Microsoft PE , ROE Etc
PE Ratio Formula when k = r ±There is no economic
profit on new investments
Use of PE Ratio Formula to Compute the Required
Return on Equity Capital
PE Notes
Relationship Between Multiples -Illustration
Problems in Applying Multiples
Market and sector PE ratios ±The danger of averages
Discounted Cash Flow
Step by Step Valuation with Free Cash Flow
Assets and iabilities that Escape DCF Valuation
Unfunded Pension iabilities
Double Counting of Assets and Obligations
DCF Valuation ±ength of Forecast
Estimating Continuing Value
Continuing Value to Add to Free Cash Flow
Sustainable Growth and Plowback Rate
Discounted Cash Flow Example
Example of Discounted Cash Flow Analysis
Discounted Cash Flow Analysis ±Real World Example
Problems with Use of Multiples in DCF
Continuing Cash Flow from NOPAT and ROIC
Reasons for Multiplying by (1+g) in Perpetuity Method
Formulas for Continuing Value
Practical Issues and Continuing Value
Issues in Summarising DCF
Example of Residual Value Analysis
Valuation from Projected Earnings and Dividends
Price Earnings and Gordon Model
Illustration of EPS and DPS Valuation
Corporate Modeling and Valuation of Business
Use of Relationship between Multiples and Financial
Ratios in Residual Value
Example of Business Segment Analysis in Corporate
Valuation Issues
Firm Valuation versus Equity Valuation Multiples ±
Depreciation Rate
Equity vs Firm Valuation ±Income Taxes and
Equity vs Firm Valuation ±everage, Depreciation and
Firm versus Equity Valuation
Measurement of Expected Growth Rate
At 100% Payout ±Growth Equals ROE
At 50% Payout ±Growth is ½ of the ROE
Equals the Current Growth ±PE is 20
ong-Term Growth is 3% instead of 7.5% -PE Ratio
Falls to 13.19
Estimation of Terminal Value
Growth Rate and Discount Rate
Exit multiple in DCF valuation
Exit multiples and DCF valuation
Common errors in FCFEFCFF model valuation
Valuation of Firms that are osing Money
Valuation of a firm that is osing Money
Valuation of a firm that is losing money
Valuation of a private firms
Valuation of a private firm
EPS Measures ±Establishing a reliable starting point
EPS adjustments
Issue of shares during the year -Rights issue
Share buy back
Dilution ±Factors and treatment
Diluted Shares
Option dilution
Multiple share classes
Multiple istings
Employee Stock options ±atest developments
Issues in the application of PEs
Example of Foreign Valuation
Free Cash Flow
In-the-money Options and Convertibles
In the Money Convertibles
Terminal Value
BO Valuation
Comparative Multiple Assignment
First, Find the File
Work through the formulas
Data Table with Multiples
Finance Professor
Finance Professors
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Published by: api-3801532 on Oct 19, 2008
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