Web Casts: Equity Instruments - Spring 2005

This 26-session equity valuation class will be taped starting January 26, 2005 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 (272 pages). If you prefer two slides per page, click here. (Updated for Spring 2005 class)
Part II: Relative Valuation and Private Company Valuation (228 pages) (If you prefer two slides per page, click here) (Updated for Spring 2005 class)
Part III: Real Options, Acqusition Valuation and Value Enhancement (192 pages) If you prefer two slides per page, click here.(Updated for Spring 2005 class)
Part IV: Closing Presentation

Session (Click here) Topics covered Lecture notes
1 (1/24/05) Introduction to Class
Approaches to Valuation

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

2 (1/26/05)

Which valuation approach is right for you?
Introduction to Discounted Cashflow Valuation
Equity versus Firm Valuation : The Consistency Principle

Introduction to Valuation (5-21)
Packet 1 (1-10)
Weekly Challenge # 1 Reconciling firm and equity valuation Weekly challenge
3 (1/30/05) DCF valuation approaches
Estimating Discount Rates
- The essence of the cost of equity
- Riskfree Rates
- Historical Equity Risk Premiums
- Country Equity Risk Premiums
- Estimating company exposure to country risk
Packet 1 (11-38)
4 (2/2/05) Implied Equity Risk Premiums
Choosing: Historical versus Implied Premium
Estimating Betas
- The Regression Approach
- The Bottom-up Solution
Packet 1 (39-59)
Weekly Challenge # 2

Estimating country risk premiums (or)
Implied Premium versus Riskfree Rate

Country premium challenge and solution
Implied premium challenge, data and solution
5 (2/7/05) More on bottom-up betas
Estimating the cost of debt
- Interest rates, ratings and synthetic ratings
- Cost of debt for emerging market companies
Cost of capital weights and currency conversion
Starting on cashflows
Packet 1 (59-79)
6 (2/9/05)

Operating Earnings
- Updating
- Cleaning up for operating leases and R&D
- One time charges?
- Normalizing Earnings
Tax Rate: Effective versus Marginal

Packet 1 (80-95)
Weekly Challenge # 3

Adjusting Operating Earnings

Weekly challenge
7 (2/14/05) Capital Expenditures: Acquisitions and R&D
Working Capital: Why non-cash?
Cashflows to Equity
Growth Rates
- Historical rates
- Analyst Estimates
Packet 1 (96-125)
8 (2/16/05)

Take the quiz, check out the solution and compare your score to the distribution.

Fundamental Growth Rates
- In earnings per share
- In net income
- In operating income

Packet 1 (126-141)
Weekly Challenge # 4 Estimating fundamental growth Weekly challenge
9 (2/23/05)

Operating Income and reinvestment for young and evolving companies
Terminal Value
- Approaches to estimating
- What is a stable growth rate?
- Mapping the path to stable growth
Choosing the right valuation model

Packet 1 (142-162)
Weekly Challenge # 4A Terminal Value Mechanics Weekly challenge

10 (2/28/05)
Webcast has 20 minute gap in middle (fire alarm)

Dealing with cash and marketable securities
Valuing crossholdings
- with complete information on cross holding
- with incomplete information
Packet 1 (163-176)
11 (3/2/05) Employee Options
- Fully Diluted and Treasury Stock Approaches
- The Value of Options
- The Impending Accounting Change
Packet 1 (177-209)
Weekly Challenge # 5 Dealing with management options Weekly challenge
12 (3/7/05) More valuation examples
- Valuing the S&P 500
- Valuing Nestle
- Valuing an emerging market company
Packet 1( 210 -238)
13 (3/9/05) Valuing a family-run company
Valuing distressed firms
Packet 1 (239-264)
Weekly Challenge # 6 Circular Reasoning in DCF valuation Weekly Challenge
Daimler valuation
14 (3/21/05) Amazon: Valuations in 2000, 2001, 2002 & 2003
Relative Valuation Basics
Packet 1 (265-End)
Packet 2 (1-15)
15 (3/23/05)

Take the quiz, check out the solution and compare your score to the distribution.

The Determinants of PE Ratios
PE Ratio Examples

Packet 2 (16- 37)
16 (3/28/05)

More on PE Ratios
Comparing PE to Growth Rates
PEG Ratios

Packet 2 (38-77)
17 (3/30/05) Relative PE Ratios
EV Multiples
EV/EBITDA Multiple
Packet 2 (78-113)
Weekly Challenge # 7 Analyzing the PEGY ratio Weekly challenge
18 (4/4/05) Price to Book Ratios
EV to Book Capital Ratios
Price to Sales Ratios
Packet 2 (114-150)
19 (4/6/05) EV to Sales Ratios
Value of a Brand Name
Choosing the Right Multiple
Packet 2 (151-187)
Weekly Challenge # 8 Relative Valuation versus DCF valuation Weekly challenge
20 (4/11/05) Valuing Private Companies
Total Betas versus Market Betas
Cashflows for Private Companies
Packet 2 (188-217)
21 (4/13/05)

Illiquidity Discounts
Value of Control in private and public companies
- Voting versus Non-voting shares
- Minority discounts
Introduction to Real Options

Packet 2 (217-228)
Packet 3 (1 - 15)
Weekly Challenge # 9 Valuing Private companies Weekly challenge
22 (4/18/05)

Take the quiz, check out the solution and compare your score to the distribution.

Option Pricing Models (contd)
Patents as options

Packet 3 (16-29)
23 (4/20/05)

Patents as options (continued)
Natural Resource options
The Option to Expand
The Option to Abandon

Packet 3 (30-61)
24 (4/25/05) Valuing Financial Flexibility
Valuing Equity in Troubled Companies
Packet 3 (62-99)
25 (4/27/05) Valuing Acquisitions Packet 3 (100-146)
26 (5/2/05) Value Enhancement: A compressed Version
Closing Thoughts on Valuation

Value Enhancement (Compressed Version)
Closing Presentation

  Take the final exam and check the solutions.