Web Casts: Valuation - Fall 2008

This 26-session equity valuation class will be taped starting September 3, 2008 and the lectures will be available as Real Player files (You can download Real Player for free by going to http://www.real.com). You can get the supporting lecture notes by clicking on the pdf files below - the pages covered by each lecture are provided next to each lecture. The quality of the video and audio leaves much to be desired but it will get better over time. For the syllabus and other details, visit the home page for the class.
Introduction to Valuation
Part I: Discounted Cashflow Valuation (249 pages). If you prefer two slides per page, click here. (Updated for Fall 2008 class)
Part II: Relative Valuation and Private Company Valuation (190 pages) (If you prefer two slides per page, click here) (Updated for Fall 2008 class)
Part III: Real Options, Acqusition Valuation and Value Enhancement (171 pages) If you prefer two slides per page, click here.(Updated for Fall 2008 class)
Part IV: Closing Presentation

This page will include the webcasts from the current class. The prior semester's webcasts can be found here

Session (Click here) Topics covered Lecture notes
1 (9/3/08)
Introduction to Class
Philosophical Basis for Valuation

Syllabus for class
Project Description
Introduction to Valuation (Pg 1-4)

2 (9/8/08)
Approaches to Valuation
- DCF versus Relative Valuation
- Market Efficiency and Valuation
Introduction to DCF - Equity versus Firm
Introduction to Valuation (Pg 5-End)
Packet 1 (1-6)

3 (9/10/08)

(Sorry about the audio quality on this one)

More on Equity versus Firm
The Big Picture of DCF Valuation
Estimating Discount Rates
- Riskfree Rates
- Equity Risk Premiums (Historical)

Congoleum cashflow page
Packet 2 (7-32)

Weekly Challenge # 1
Reconciling firm and equity valuation Weekly challenge #1
4 (9/15/08)
Equity Risk Premiums (continued)
- Country risk premiums
- Measuring company exposure to country risk
- Implied Equity Risk Premiums

Implied Equity Risk Premium (1/1/08)
Implied Equity Risk Premium (9/14/08)

Packet 1 (33-53)

- The problems with regression betas
- Alternatives
- Bottom up Betas
Cost of debt
Weights for debt and equity
Packet 1 (54-76)
Weekly Challenge # 2
Estimating country risk premiums (or)
Implied Premium versus Riskfree Rate
Country premium challenge and solution
Implied premium challenge, data and solution
6 (9/22/08)
Dealing with hybrids
Estimating Cashflows
- The importance of updating
- Dealing with operating leases
- Dealing with R&D
Packet 1: 77 - 96
7 (9/24/08)
Final thoughts on earnings - accounting fraud and negative earnings
Capital expenditures and working capital
First steps on Cashflows to equity
Packet 1: 97-112
Weekly Challenge # 3

Adjusting Operating Earnings

Weekly challenge
8 (9/29/08)
Free Cashflow to Equity and Leverage
Estimating Growth
- Historical Growth
- Anaylyst estimates of growth
- Fundamental Growth
Packet 1: 113-141
Weekly Challenge # 4 Estimating fundamental growth Weekly challenge
9 (10/6/08)

Take the first quiz and check out the solution as well as the distribution of grades for the class.

More on fundamental growth
Growth in equity earnings versus operating earnings
Estimating growth in money losing companies
First steps in terminal value

Packet 1: 142-153
10 (10/8/08)
Rules on terminal value
Picking the right DCF model
Loose ends in valuation
- Dealing with cash
Implied equity risk premiums: 9/15-10/10
Packet 1: 154-174
Weekly Challenge # 4A Terminal Value Mechanics Weekly challenge
11 (10/13/08)
Valuing Cross Holdings - Minority and Majority
Valuing other assets
The value of complexity
Defining debt - for cost of capital and for netting out

DCF Review Questions

Packet 1: 175-192

12 (10/15/08)
Equity Options: Effect on Value
- Stable growth Dividend discount model (and implied growth rates)
- Valuing a bank
Valuations of Con Ed, Amro, Goldman & Wells Fargo
Packet 1: 193-212
Weekly Challenge # 5 Dealing with management options Weekly challenge
13 (10/20/08)
The value of the entire market
Valuation of a growth company
Value of corporate governance
Commodity companies

Valuations of S&P 500, Tsingtao, Aracruz, Tube Investments and Embraer
Packet 1: 213-228

14 (10/22/08)
Valuing cross holdings
The Dark Side of Valuation - Valuing young companies
Valuing declining and distressed companies
Valuations of Hyundai Heavy, Amazon (2000), Amazon (2001), Amgen, Sears and Global Crossing
Packet 1: 229-249
Weekly Challenge # 6 Circular Reasoning in DCF valuation Weekly Challenge
Daimler valuation
15 (10/27/08)
Relative Valuation
- What is it?
- Pervasiveness of relative valuation
- Why is relative valuation so popular?
- Four steps in deconstructing multiples
PE Ratio
Packer 2: 1-21
16 (10/29/08)
Take the second quiz and check out the solution as well as the distribution of grades for the class.
More on PE ratios
Packet 2: 22- 37
17 (11/3/08)

PE Ratio - Market wide regression
PEG Ratio
- Definition
- Analysis
Value Multiples

Packet 2: 37-78
18 (11/5/08)
EV/EBITDA Multiples
Price to Book
EV to Invested Capital
Price to Sales
Packet 2: 79-118
Weekly Challenge # 7 Analyzing the PEGY ratio Weekly challenge
19 (11/10/08)
More on revenue multiples
The value of a brand name
Other qualitative variables
Choosing the right multiple
First steps in private company valuation
Package 2: 119-153
20 (11/12/08)

Valuing private businesses
- Private to private transactions (Key person discounts, lack of diversification, illiquidity)
- Private to public transactiions
- Private to IPO

Packet 2: 154-190
Weekly Challenge # 8 Relative Valuation versus DCF valuation Weekly challenge
21 (11/17/08)
Introduction to Real Options
- Three key questions for real options
- The option to delay
- Valuing a patent
Packet 3: 1-31
22 (11/19/08)
Valuing a firm with patents
Natural resource options
The option to expand
The option to abandon
Packet 3: 32-65
Weekly Challenge # 9
Valuing a private company

Weekly Challenge

23 (11/24/08)
Take the third quiz and check out the solution as well as the distribution of grades for the class.
Valuing financial flexibility as an option
Valuing equity in distressed companies
Packet 3: 66-89
24 ( 12/1/08)
Valuing equity in distressed companies - Estimating inputs
Acquirer's Anonymous - Seven errors in acquisitioin valuatioin
Packet 3: 90-120
25 (12/3/08)
Final tests on acquisitions
Value Enhancement
- Versus Price Enhancement
- Ways of enhancing value
- Expected value of control
Packet 3: 121-151
26 (12/8/08)

Extenstions of the value of control
- Voting versus non-voting shares
- Minority discount in private companies
Alternative value enhancment measures
Closing thoughts on valuation

Packet 3: 152-170
Closing presentation
Summary of your valuations
Final Exam (12/17/08)
Take the final exam and check out the solution and check out the distribution.