The Dark Side of Valuation
This book looks at the valuation of technology firms, using five technology firms, ranging from Motorola to Amazon.com to Rediff. .You can read the preface to the book by clicking here. On this web site, you will find supporting material, spreadsheets, datasets and the excel spreadsheets containing the valuation of the five firms. I have found a few typos in the book (I am sorry...sorry...) If you find any more, please let me know.

You can pick the chapter that you would like to go to, to see illustrations, solutions and other supporting material.
Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6
Chapter 7 Chapter 8 Chapter 9 Chapter 10 Chapter 11 Chapter 12
Chapter 13          

You can also download information on and the valuations of the five firms valued in this book below:

Company Home Page Valuation
Amazon.com amazon.com Valuation - July 2000
Valuation - January 2001
Ariba ariba.com Valuation - July 2000
Cisco cisco.com Valuation - July 2000
Valuation - March 2001
Motorola motorola.com Valuation - July 2000
Rediff.com rediff.com Valuation - July 2000

 

Chapter 1: The Dark Side of Valuation
Readings
  1. Old versus New Paradigms: Blodget versus Grantham
  2. Wall Street's Hype Machine
  3. Its a Mad, Mad, Mad... Market
  4. Web Sales may be lifting market

Chapter 2: Show me the Money: The Fundamentals of Discounted Cashflow Valuation
Topic Details
Data Sets
Spreadsheets ddmst.xls: Allows you to value a stable growth dividend paying stock, using a dividend discount model.
ddm2st.xls: Aallows you to value a dividend paying stock, using a 2-stage dividend discount model.
Readings
  1. The Motley Fool's Guide to Investing Basics

Chapter 3: The Price of Risk: Estimating Discount Rates
Topic Details
Data Sets

histret.xls: Summarizes historical returns on stocks, T.Bonds and T.Bills going back to 1928
histimpl.xls: Shows the inputs used to calculate the premium in each year for the U.S. market.
beta.xls: Summarizes the average betas by sectors in the United States
Spreadsheets implprem.xls: Allows you to estimate the implied equity premium in a market.
levbeta.xls: Allows you to estimate the unlevered beta for a firm and compute the betas as a function of the leverage of the firm.
ratings.xls: Allows you to estimate the synthetic rating and cost of debt for any firm.
wacccalc.xls: Allows you to convert book values of debt into market values.
Readings

Estimating the Risk Premium
Estimating Risk Parameters

Chapter 4: Cash is King: Estimating Cash Flows
Topic Details
Data Sets taxrate.xls: There is a dataset on the web that summarizes average effective tax rates by industry group in the United States for the most recent quarter.
capex.xls: There is a dataset on the web that summarizes capital expenditures, as a percent of revenues and firm value, by industry group in the United States for the most recent quarter.
wcdata.xls: There is a dataset on the web that summarizes non-cash working capital needs by industry group in the United States for the most recent quarter.
Spreadsheets R&Dconv.xls: This spreadsheet allows you to convert R&D expenses from operating to capital expenses.
Oplease.xls: This spreadsheet allows you to convert operating lease expenses into debt.
Readings
  1. Examples of Earnings Manipulation
  2. Microstrategy's accounting

Chapter 5: Looking Forward: Estimating Growth

Topic Details
Data Sets histgr.xls: Summarizes historical growth rates in earnings and revenues by industry group for the United States.
fundgrEB.xls: Summarizes reinvestment rates and return on capital by industry group in the United States for the most recent quarter.
margins.xls: Summarizes operating margins, by industry, for the United States.
Spreadsheets chgrowth.xls: Allows you to estimate the expected growth rate in operating income for a firm where the return on capital is expected to change over time.
Readings
  1. Hot Growth Companies

Chapter 6: Estimating Firm Value

Topic Details
Data Sets eva.xls: Summarizes the returns on capital, costs of capital and excess returns, by industry group, for firms in the United States
cash.xls: Summarizes the value of cash and marketable securities by industry group in the United States for the most recent quarter.
Spreadsheets fcffginzu.xls: Allows you to value the operating assets of a firm, allowing for a high growth and a transition phase
Readings
  1. Cash Burn Ratios and Survival
  2. The Fall of a dot-com: Value America

Chapter 7: Management Options, Control and Liquidity

Topic Details
Data Sets
Spreadsheets warrants.xls: This spreadsheet allows you to value the options outstanding in a firm, allowing for the dilution effect.
fcffginzuiter.xls: This modified version of the valuation spreadsheets allows you to link the price used in the option pricing model to the value per share from the valuation.
Readings
  1. Options at Dot-com firms

 

Chapter 8: Relative Valuation

Topic Details
Data Sets multregr.htm: Market regressions of multiples against fundamentals
Spreadsheets eqmult.xls: Allows you to estimate the price earnings ratio for a stable growth or high growth firm, given its fundamentals.
firmmult.xls: Allows you to estimate the value to sales ratio for a stable growth or high growth firm, given its fundamentals
Readings  

Chapter 9: Earnings Multiples

Topic Details
Data Sets pedata.xls: Summarizes price earnings ratios, PEG ratiosand fundamentals by industry group in the United States for the most recent year.
Spreadsheets eqmult.xls: Allows you to estimate the price earnings ratio for a stable growth or high growth firm, given its fundamentals.
Readings
  1. PE with R& D
  2. The Fool Ratio (PEG ratio)

Chapter 10: Other Multiples

Topic Details
Data Sets psdata.xls: Summarizes price to sales and value to sales ratios and fundamentals by industry group in the United States for the most recent year
Spreadsheets firmmult.xls: Allows you to estimate the value to sales ratio for a stable growth or high growth firm, given its fundamentals
Readings
  1. Introduction to Price to Sales Ratio
  2. Motley Fool Guide to Price to Sales Ratio
  3. Parsing the Price to Sales Ratios

Chapter 11: Real Options in Valuation

Topic Details
Data Sets optvar.xls: Summarizes standard deviations in equity and firm value, by industry, for firms in the United States
Spreadsheets optlt.xls: Allows you to estimate the value of an option, using the dividend-adjusted Black-Scholes model.
delay.xls: Allows you to estimate the value of the option to delay a project.
product.xls: Allows you to estimate the value of a patent, using an option pricing model.
expand.xls: Allows you to estimate the value of the option to expand an investment or project.
Readings
  1. The Promise and Peril of Real Options

Chapter 12: Value Enhancement

Topic Details
Data Sets eva.xls: There is a dataset on the web that summarizes economic value added (EVA) by industry group in the United States for the most recent year
Spreadsheets fcffeva.xls: Allows you to value a firm based upon expected economic value added in future years, and compares it to a discounted cash flow value estimate of value.
cfroi.xls: Allows you to estimate the CFROI for an investment or a firm.
Readings
  1. Value Enhancement: Back to Basics

Chapter 13: A Postscript

Topic Details
Data Sets
Spreadsheets
Web Sites
  1. www.internetstocks.com: This site covers internet stock valuations
  2. www.redherring.com: This magazine covers venture capital investing.