Indian Institute of Management, Kashipur

Post Graduate Program in Management

BUSINESS VALUATION
Term IV, 2019 - 20
Credit: 1

Instructors
Name: Ashish Kumar
Contact Info: D2/7, First Floor, Academic Building, ashish.kumar@iimkashipur.ac.in.
Office Hours: During office hours. No appointments required.

Prerequisites: Financial Reporting and Analysis (C+) and Corporate Finance (C+)

Course Description
Probably the greatest of all Gifts is the Power to Estimate Things at Their True Worth. A good business
is absolutely the best investment vehicle one can ever have, provided he/she understands the underlying
value and does not overpay for it. Arriving at the value of a business or a group of business assets requires
an analysis and weighting of all the drivers of value, both tangible and intangible, and those that are within
the control of management, and those that are not. Hence the structure this course is based on some of the
most commonly discussed and applied issues in Valuation which will help management graduates to have
fair understanding of business valuation that is useful across disciplines.

Course Objectives
As the heart of this course is real-world valuation issues, it would build on the premise of valuation
techniques, approaches and methods with a situational focus. Beginning with the identification of the
drivers of value in the valuation process, the course will include real-world exposure through the course
practicum. Upon completion of this course, participants can
• PLO1a. Develop conceptual skills in analytical valuation approaches
• PLO1e. Carry out valuation analysis of complex corporate/financial structures
• PLO3b. Understand how valuation plays a central role in the strategic decision-making process
Required Textbook
Investment Valuation: Tools and Techniques for Determining the Value of Any Asset by Ashwath
Damodaran, 3rd Edition, Wiley Finance

Pedagogy and Course Requirements

Good mix of lectures, illustrations, and case study discussions. Case examples from various industries
and countries will be prominently discussed. The case method of instruction includes the preparation,
presentation and discussion of business cases by study groups. This approach helps the students to focus
on the application of concepts within a business context. It promotes independent thinking, clear
communication and a careful attention to all the dimension of a problem.

The course will rely heavily on participant-intensive activities. Participants will have the responsibility
for analyzing cases and presenting/discussing topics as shown in the course schedule that follows. Each
student must accept the responsibility for course preparation. Thus, for each session, every student must
study the assigned readings. In addition, each student is expected to participate actively in classroom
discussions. This means that everyone should have 1) studied the case thoroughly, 2) developed a
defensible solution, and 3) be in a position to critique the solutions of others as well as his/her own. To
make the discussion effective, study teams would be formed so that you can discuss the cases together.
This is very effective if everyone on the study team does their job.

Grading
Mid-Term Exam 30%
End-Term Exam 30%
Quiz (N-1) 20%
Project (group) 20%

Group Project Details

This project is designed to apply the valuation techniques, we learn in class on companies in the real
world. It is a group project and each group will comprise 4 to 5 students. Each group will be assigned
with an industry and every student in the group has to select at least one company from the same industry.
Develop your narrative for this company. Design your story, how you see your company evolving over
time, given what you know about it, its market and the competition. Tie your narrative to key numbers
that you will be using in your valuation. Value the stock in each company using discounted cash flow
models and value/price multiples. Evaluate how sensitive your value estimates are to changes in your
narrative. Evaluate your company against the comparable firms and draw your conclusions about the
company. Presentation of the project will be started from 13th class onwards. The individual grades for
the group-component will be calculated as follows: 50% of the team grade for project report submission
and 50% of individual presentation.
Tentative Class Schedule
(Additional readings, cases, and articles may be assigned as they become available)
Session Topics
Session 1 Valuing Business – An Overview
of Analytical Approaches
Session 2 Analyzing Financial Statements
and Identifying Value Drivers
Session 3 - 4 DCF Method of Valuation -
Determining Discount Rate
Session 5-6 DCF Method of Valuation -
Estimating Cash Flows
Session 7 FCFF Method of Valuation -
Terminal value and Growth Rate
Session 8 FCFE Method of Valuation
Session 9 -10 APV and CCF Method of
Valuation
Session 11-12 Relative Valuation Methods
Session 13 Valuation with
Subscriber/Customer Base
Readings
Chapter 1 & 2 – AD
What’s it worth? A General Manager’s
Guide to valuation (HBR article)
Valuation Techniques (9-384-185 by M J
Roberts)
Chapter 3 – AD
Basic Ratio Analysis and Equity
Valuation (9-185-149 by David F
Hawkins)
Chapter 7 & 8– AD
HBR Case: Cost of Capital at Ameritrade
(201046-PDF-ENG)
Chapter 9 & 10 – AD
Chapter 11 & 12 – AD
Notes on alternative method of estimating
terminal value (9-298-166)
HBR Case: Mercury Athletic Footwear
(4050)
Chapter 14 – AD
Note on valuing Equity Cash Flows (9-
295-085 by Timothy A. Luehrman)
Chapter 15 – AD
Using APV: A Better tool for Valuing
Operations (HBR article)
Notes on Capital Cash Flow Valuation
(9-295-069 by Richard S Ruback)
HBR Case: Sampa Video Inc. (9-201-
094)
Chapter 17,18 &19 – AD
Introduction to Valuation Multiples (9-
206-95 by Robin Greenwood Lucy white)
Corporate Valuation and Market
Multiples (9-206-039 by Timothy A
Luehrman)
Subscribers Models (9-205-061 by Mihi
R Desai, Robin Greenwood and Lucy
White)
 HBR Case: Valuing Project Achieve (9-
201-080)
Session 14 EVA method of Valuation Chapter 32 – AD
Session 15 The Contingent Claim (Real Investment Opportunities as real options:
Option) Approach to Valuation Getting Started on the number
HBR Case: Arundel Partners: The sequel
Project
Session 16 Valuation of Privately/Closely Chapter 24 – AD
held business HBS Note on Valuing Private Businesses
Note on Valuing Control and Liquidity in
Family and Closely Held Firms
HBR Case: Buck Auto Care Products:
Selling a private company (W16425)
Session 17 Cross Boarder Valuation HBS Notes on cross-border valuation
HBR Case: Groupe Airel S.A.: Parity
Condition and Cross Border Valuation
Session 18 IPO Valuation Note on IPO Share Allocation
HBR Case: Quintiles IPO (KEL843)
Session 19 Start Up Valuation HBR Case: Applied Mobile Lab: Valuation
of a Start Up (W16497-PDF-ENG)
Session 20 Student Presentation

Course Policies:
Responsibility for Course Materials: You are responsible for all material covered in class. If you are
absent, you are responsible for obtaining the information you missed.

1. Classroom Behavior: We expect you to participate in class activities in a mature and appropriate
manner. Disruptive or otherwise unacceptable behavior will not be tolerated.
2. Use of Mobile and Laptop: Mobiles are not permitted in the classroom.. In the class, you must
carry your laptop and keep it down unless asked by the instructor.
3. Academic Conduct: All members of the academic community at IIM Kashipur are expected to
practice and uphold standards of academic integrity and honesty. Academic integrity means
representing oneself and one’s work honestly. Misrepresentation is cheating since it means
students are claiming credit for ideas or work not actually theirs and are thereby seeking a grade
that is not actually earned. Following are some examples of academic dishonesty:
i. Cheating on quizzes and examinations. This includes using materials such as books
and/or notes when not authorized by the instructor, copying from someone else’s paper,
helping someone else copy work, substituting another’s work as one’s own, theft of exam
copies, or other forms of misconduct on exams.
ii. Plagiarizing the work of others. Plagiarism is using someone else’s work or ideas
without giving that person credit; by doing this students are, in effect, claiming credit for
someone else’s thinking. Whether students have read or heard the information used, they
must document the source of information. When dealing with written sources, a clear
distinction should be made between quotations (which reproduce information from the
source word-for-word within quotation marks) and paraphrases (which digest the source
 of information and produce it in the student’s own words). Both direct quotations and
paraphrases must be documented. Even if students rephrase, condense or select from
another person’s work, the ideas are still the other person’s, and failure to give credit
constitutes misrepresentation of the student’s actual work and plagiarism of another’s
ideas. Buying a paper or using information from the World Wide Web or Internet without
attribution and handing it in as one’s own work is plagiarism.
iii. Falsifying records or providing misinformation regarding one’s credentials.
iv. Unauthorized collaboration on computer assignments and unauthorized access to
and use of computer programs, including modifying computer files created by others
and representing that work as one’s own.
v. Unless they specifically indicate otherwise, instructors expect individual, unaided work on
homework assignments, exams, lab reports and computer exercises, and documentation of
sources when used. If instructors assign a special project other than or in addition to exams,
such as a research paper, or original essay or a book review, they intend that work to be
completed for that course only. Students must not submit work completed for a course
taken in the past or for a concurrent course unless they have explicit permission to do so
from both faculty members.

Any academic misconduct will automatically result in a failing grade for the class and the
student will be reported to the committee on academic misconduct for further disciplinary
action.

4. Attendance: As far as I am concerned, you are an adult and it is your decision whether or not you
attend class. However, your decision not to attend a class may have negative consequences for
your class grade. (Please consult PGP Participants’ Handbook for this purpose).
If you decide to attend a class, you must come to the class and take your seat sufficiently before
the beginning of the class time. Under no circumstances you would be allowed in once the class
has started. You are expected to sit through the class unless you have a prior permission from the
instructor to leave the classroom before the end of the class.
5. Late submission: Any late submission beyond the deadline (even by few seconds) will result
in 0 point. Except in case of emergencies, with a doctor's note, any questions about late
submission will not be entertained.
6. Missed exam: There is no make-up for the missed exams unless the student has discussed and
made an arrangement with the instructor for a valid reason beforehand. In all other instances, the
student must produce a valid doctor's note for the day the student missed the exam. Such doctor's
note must be produced in the same week the student missed the exam.
7. Grade Discussion: It is the student’s responsibility to monitor his or her own grades and raise any
questions s/he may have within one week of the grades assigned.
8. Extra Credit: No Extra credit shall be given to make-up for missed quizzes, assignments, exams,
project, or poor performance in the course.

Learning Accommodations
To provide equal access to the educational programs and opportunities, IIM Kashipur is dedicated to providing
appropriate accommodations to students with documented disabilities such as attention deficit-hyperactivity
disorders, physical disabilities, sensory impairments, and psychiatric disorders in order to help them achieve their
academic and personal potential. These academic accommodations are provided to students at no cost.

Inclusivity Statement
IIM Kashipur believes that diversity and inclusiveness are essential to excellence in education and innovation.
Our community represents a rich variety of backgrounds, experiences, demographics, and perspectives. IIM
Kashipur is committed to fostering a learning environment where every individual is respected and engaged. To
facilitate a dynamic and inclusive educational experience, we ask all members of our community to:
• be open to the perspectives of others
• appreciate the uniqueness of their colleagues
• take advantage of the opportunities to learn from each other
• exchange experiences, values, and beliefs
• communicate in a respectful manner
• be aware of the individuals who are marginalized and involve them
• keep confidential discussions private