Strategic Corporate

Finance
Module – I
Corporate Valuation
Valuation of Bonds and Securities
 Basis of Valuation
 Nature of Security
 Discount rate
 Relevant cashflows from financial asset i.e.
security
 The process of valuation
 Judgment in valuation
 Valuation – Management’s
Perspective
 The basic objective of an entity is to
maximise the value of the firm.
 The management should constantly aware
of this in decision making.
 If the decision of management leads to
maximising the value of securities.
 Management must know how to value the
stock and bonds.
 Valuation – Investor’s Perspective
 Investors also have an objective to
maximise their wealth by investing in
different securities.
 The process of valuation will help them to
decide upon – to buy / to hold / to sell the
security.
 Portfolio management
 Concept of Value
 Going concern value
 Liquidation Value
 Book value
 Market Value
 Intrinsic Value
 Economic Value
 Intrinsic / Economic Value:

The intrinsic value of a security is the present

value of the cashflows expected from the
security discounted at a rate of return
appropriate for the risk associated with the
security.