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Val emails


The emails for this class will be collected on this page, arranged chronologically. Since I send quite a few, you can target it on a specific month by going here:

Email content
Welcome back! As I checked through the roster, I noticed a lot of familiar names from corporate finance, and you know that the email deluge that awaits you.I am sure that you are finding that break is passing by way too fast, but the semester will soon be upon us and I want to welcome you to the Valuation class.  One of the best things about teaching this class is that valuation is always timely (and always fun...) Just as examples: Is it time to sell Tesla or to buy it?  How much di the Barbie Buzz add to Birkenstock’s value? Why do the Adelsons think that the Dallas Mavs are worth $9 billion? You will find the answers to these and other questions on my blog:

1. Preclass work: I  know that some of you are worried about the class but relax! If you can add, subtract, divide and multiply, you are pretty much home free… Seriously, all I need of you is a familiarity with basic finance, accounting and statistics.  If you feel shaky, you may want to check out the online classes that I have on accounting and financing basics:
1. Accounting class (I am not an accountant, don’t care much for how accountants think about companies and view accounting as a raw material provider.. This class reflects that view): http://people.stern.nyu.edu/adamodar/New_Home_Page/webcastacctg.htm 
2. Basics of finance (present value, a dash of this and that….): http://people.stern.nyu.edu/adamodar/New_Home_Page/webcastfoundationsonline.htm 

2. For this class: If you want to get a jump on the class, you can go to the class web page:
As the schedule stands right now, we will meet on Mondays and Wednesdays from 1.30 pm - 2.50 pm  in Paulson Auditorium, starting on January 29. I would love to see all of you in class for every session, but if you have to miss a class or two, because the classes will be recorded and available on three platforms:
a. My website: The recordings of the sessions, with all of the material (slides, links, other) that I use during the session will be available on the webcast page for the class: 
b. YouTube Channel: There is a second option, if your broadband connection is not that great and you are watching on a Tablet/smartphone. There is a YouTube playlist for this class, where all class sessions will be loaded: https://www.youtube.com/playlist?list=PLUkh9m2BorqlOjmzA9_LYgnzgt0N-2hGS
c. Brightspace: This is the NYU learning management system and the recorded sessions should be accessible from that system as well.
  When you get a chance, check it out.

3. Syllabus & Calendar: The syllabus for the class is available on the website for the class and is also linked  here:
and there is a google calendar for the class that you can get to by clicking on

For those of you already setting up your calendars, it lists when the quizzes will be held and when projects come due. 

5. Lecture notes: The first set of lecture notes for the class is ready. You can either print off the slides, or save them online.  .
Please download and print only this packet on discounted cashflow valuation. The other two packets (yes, there are three…) are not ready yet...

6. Books for the class: First things first. You don’t need a book to get through the class, and if you are budget-constrained, don’t buy any book. If you decide to buy a book, the best book for the class is the Investment Valuation book - the third edition. (If you already have the second edition, don't waste your money. It should work...) You can get it at Amazon or wait and get it at the book store... If you are the law-abiding type, you can buy "Damodaran on Valuation" - make sure that you are getting the second edition. Or, as a third choice, you can try The Dark Side of Valuation, again the second edition, if you are interested in hard to value companies.. Or if you are budget and time constrained, try "The Little Book of Valuation". Finally, if you really want to take a leap, try my newest book, Narrative and Numbers at 
You will find the webpages for all of the books at http://www.stern.nyu.edu/~adamodar/New_Home_Page/public.htm. If you want a comparison of the books, try this link: http://people.stern.nyu.edu/adamodar/New_Home_Page/valbookcomp.html 

7. Valuation apps: One final note. I worked with Anant Sundaram (at Dartmouth) isn developing a valuation app for the iPad or iPhone that you can download on the iTunes store: http://itunes.apple.com/us/app/uvalue/id440046276?mt=8 
It comes with a money back guarantee...  Sorry, no Android version yet…  

I am looking forward to seeing you in two weeks in class. Until next time!

It’s been a week since my last email, and while not a whole lot has happened, I thought I should check in ahead of next week’s class. First, if this is the first email you are reading, then you should catch up with the earlier one, which are available at the link below:
If you are wondering about the logistics (exams, projects etc.), we will start the first class with the syllabus, which will also lay out the themes for the class:
As you go through the syllabus, you will notice mention of a project and you can find the details of that project here:
Once we are through the syllabus in session 1, we will turn to an introductory packet (of about 20 pages). The link to that package is below:
Please have this ready for the first session. The rest of the class will be covered in the lecture note packets, and I sent you the link to the first one last week (but here it is again):

Having drowned you with all of that stuff, let me hit with you some pre-class reading (and I don’t think it is too painful). I don’t do much academic research and am supremely uninterested in writing for an echo chamber. Much of what I have written that is original or different has be initially (at least) on my blog.  I spend the first few weeks of each year, talking about the data that I update on my website:
The first two updates re on my blog. Please browse through them, because they are relevant for class:
  1. Data Update 1 for 2024: The Data Speaks, but what is it saying?
  2. Data Update 2 for 2024: A Stock Comeback - Winning the Expectations Game!
  3. Data Update 3 for 2024: Interest Rates in 2023 - A Rule-breaking Year
  4. Data Update 4 for 2024: Danger and Opportunity - Bringing Risk into the Equation
The first class will be tomorrow (Monday, January 29, from 1.30 pm - 2.50 pm, NY time) in KMEC 1-70. Please do come, if you can. If you are unable to, either because of logistical or health reasons, the class will be carried on Zoom. 
Join Zoom Meeting: https://nyu.zoom.us/j/96754787562 
It’s been a week since my last email, and while not a whole lot has happened, I thought I should check in ahead of next week’s class. First, if this is the first email you are reading, then you should catch up with the earlier one, which are available at the link below:
If you are wondering about the logistics (exams, projects etc.), we will start the first class with the syllabus, which will also lay out the themes for the class:
As you go through the syllabus, you will notice mention of a project and you can find the details of that project here:
Once we are through the syllabus in session 1, we will turn to an introductory packet (of about 20 pages). The link to that package is below:
Please have this ready for the first session. The rest of the class will be covered in the lecture note packets, and I sent you the link to the first one last week (but here it is again):

Having drowned you with all of that stuff, let me hit with you some pre-class reading (and I don’t think it is too painful). I don’t do much academic research and am supremely uninterested in writing for an echo chamber. Much of what I have written that is original or different has be initially (at least) on my blog.  I spend the first few weeks of each year, talking about the data that I update on my website:
The first two updates re on my blog. Please browse through them, because they are relevant for class:
  1. Data Update 1 for 2024: The Data Speaks, but what is it saying?
  2. Data Update 2 for 2024: A Stock Comeback - Winning the Expectations Game!
  3. Data Update 3 for 2024: Interest Rates in 2023 - A Rule-breaking Year
  4. Data Update 4 for 2024: Danger and Opportunity - Bringing Risk into the Equation
The first class will be tomorrow (Monday, January 29, from 1.30 pm - 2.50 pm, NY time) in KMEC 1-70. Please do come, if you can. If you are unable to, either because of logistical or health reasons, the class will be carried on Zoom. 
Join Zoom Meeting: https://nyu.zoom.us/j/96754787562 
We are officially rolling. If you enrolled in the class in the last couple of days, you did miss the first two emails but they are already in the email chronicle, in case you are interested:
Email chronicles: http://www.stern.nyu.edu/~adamodar/New_Home_Page/eqemail.html
This chronicle will be updated at the end of each week to include all emails sent up until then. 

If you were able to make it today’s class, thank you, and the slides that we used for the class should be at the links below:
Introduction to Valuation (Slides for Wednesday’s class): https://pages.stern.nyu.edu/~adamodar/pdfiles/eqnotes/eqsyllspr24.pdf
I mentioned the project for the class, but only in very general terms. You can find the specifics at the link below:
Project: https://pages.stern.nyu.edu/~adamodar/pdfiles/eqnotes/eqprojspr24.pdf
A quick note about today's class.  During the session, I told you that that this was a class about valuation in all of its many forms – different approaches (intrinsic, relative & contingent claim), different forums (for acquisitions, value enhancement, investing) and across different types of businesses (private & public, small and large, developed & emerging market).  In addition, I laid out the broad themes for the class - that valuation is a craft, that valuing something is very different from pricing the same thing, that a good valuation is a bridge between stories and numbers and that acting on valuation requires faith.

 After spending some time laying out the script for the class (quizzes, exams, weekly tortures), I suggested that you start thinking about forming a group and picking companies. To get the process rolling, here is what I have done
1. Group: Please do find a group to nurture your valuation creativity, and a company to value soon. If you are ostracized, or feel alone, I will create an orphan list and make sure that you are adopted.
2. Company Choice: Once you pick a company, collect information on the company. I would start off on the company's own website and download the annual report for the most recent year (probably 2019) and then visit the SEC website (http://www.sec.gov) (for US listings) and download 10Q filings. (You can pick any publicly traded company anywhere in the world to value. The non-US company that you value can have ADRs (but does not have to have ADRs) listed in the US but you still have to value it in the local currency and local market. You can even analyze a private company, if you can take responsibility for collecting the information.)
3. Webcast of today’s class: The web casts for the first class are up and running in all of their variations (Zoom recording, downloadable video, downloadable audio and YouTube). You can access them by going to:
4. Lecture Note Packets: Please download the first lecture note packet, when you get a chance. You can either download it as a powerpoint file (though powerpoint bloats file size or as a pdf file)
Powerpoint slides: https://pages.stern.nyu.edu/~adamodar/pptfiles/val3E/valpacket1spr24.pptx
PDF version: https://pages.stern.nyu.edu/~adamodar/pdfiles/eqnotes/valpacket1spr24.pdf  

5. Post class test: To review what we did in class today, I prepared a very simple post-class test. I have attached it, with the solution. Give it your best shot.
If you did not get the syllabus, project description and the valuation intro in class this morning, they are all available to print off from this site. I will also be sending out a post class test and solution after each session that should take you no more than 5-10 minutes to do. It is a good way to review the class and I hope that you find it useful. Sorry about the length of this email, but there will be more to come (I promise!).

Attachment: Post-class test and solution.

As promised, the first valuation of the week is upon you, and it is of a company that evokes strong views in both directions, Tesla. I valued Tesla for the first time in 2013, and have valued it every year since, and it still surprises me how much disagreement there is among investors on its future. There are some who believe that Tesla is destined to be the greatest company ever, a beacon of hope that will be worth trillions of dollars. There are others who seem to think of the entire company as a scam, with nothing. Not surprisingly, what you think about Tesla is tied to how you feel about Elon Musk as a person. I have always tried to navigate a middle ground, conceding to the optimists that Tesla is a unique companies that has changed the automobile business and to the pessimists that it is personality-driven and sometime oddly behaved (for a company…I have called it my corporate teenager). To get a sense of my history with Tesla, and where I stand at the moment, take a look at this blog post:
At the time, I valued the company at about $180 and the stock was trading at $197. It climbed to $250 in the weeks after, before collapsing in the last few weeks back to $180 again. On January 24, Tesla released its quarterly and annual reports (link to 2023 10K: https://ir.tesla.com/_flysystem/s3/sec/000162828024002390/tsla-20231231-gen.pdf ) and I updated my valuation to reflect the most update information for both the company and the market (spoiler alert: value barely changed, even though costs of capital dropped significant):
It is a complex company to value, and I have tried to make it a little more user friendly with a master inputs page, where you can make your judgments on each of the key dimensions, from the end game for Tesla (in terms of revenues), to the margins you expect it to earn to its risk, and come up with your valuation of the company. For the moment, you will have to trust me to faithfully take your inputs and convert them to cash flows and discount rates, and if you go to the valuation page, you will see the value per share. If you are interested, check out the story worksheet, where I fill out the story behind the numbers.   Once you are done, please go to this shared Google spreadsheet and enter your numbers:
Note that when I valued the company over the weekend, and used the closing price last Friday as my comparison, and ended up buying the stock. The stock jumped about $10 yesterday, making your target a little higher.
Today's class started with a test on whether you can detect the direction bias will take, based on who or why a valuation is done. The solutions are posted online on the webcast page for the class. Bringing in the effects of uncertainty and complexity, I argued that these three (bias, uncertainty and complexity) forces are the biggest challenges to good valuation. In fact, they represent the Bermuda Triangle of Valuation, a place where good sense goes to disappear. If you have the time to watch a much, much longer version of this topic, try this:

We then moved on to talk about the three basic approaches to valuation: discounted cash flow valuation, where you estimate the intrinsic value of an asset, relative valuation, where you value an asset based on the pricing of similar assets and option pricing valuation, where you apply option pricing to value businesses. With each approach, we talked about the types of assets that are best priced with that approach and what you need to bring as an analyst/investor to the table. For instance, in our discussion of DCF valuation and how to make it work for you, I suggested that there were two requirements:  a long time horizon and the capacity to act as the catalyst for market correction. We will be starting on the first lecture note packet on Monday. So, please have it downloaded and ready to go.

Attachments: Post-class test and solution.

Each week, I will use the Thursday email to prod, nag and bug you about the project. So, without further ado, here is where you should be this first week:
  1. Find a group: The groups are yours to create and you should try to have at least 4 people in a group and not more than 8 (that limit is for your own protection).  If you are being ostracized and no one wants you,  you can add your name to the orphan list for the class: https://docs.google.com/spreadsheets/d/1ilonvo5nKx8MFLpRw_PuwFdzGzrr-S5jvldVMkUAz4Q/edit?usp=sharing 
  2. Pick a company: This will require some coordination across the group to make sure that you meet the minimum criteria (at least one money loser, high growth, emerging market, service company). In making this choice, remember that you can value any business you want, public or private, small or large, listed in any market. There are at least a couple of entrepreneurs in the class who are valuing their own businesses and  quite a few valuing privately owned family businesses. Once you have picked a company, please enter your company name in the Google class master spreadsheet: https://docs.google.com/spreadsheets/d/1lSuASQzSy3thXAW7ZnsyHgO3hAIV0LbAYIPyfGCDXMc/edit?usp=sharing 
  3. Annual Report: Find the most recent annual report for your company. If you are valuing a private business, just ask for income statements and balance sheets for as long as you can get them (I will assume that you know the owner or better still, you are the owner).
  4. Public filings: If your company has quarterly reports or filings pull them up as well. 
In doing all of this, you will need data and Stern subscribes to one of the two industry standards: S&P Capital IQ (the other is Factset). As MBAs, you should have access to Capital IQ on the Stern Dashboard, but you need to ask for access, I have attached a pdf file that shows you how. 

This is the seventh or eighth email for the class. If you have not been receiving these emails (which means that you are reading this in the chronicles), it is worth noting that I don’t keep an email list for the class. I use the Google groups that Stern creates. In theory, students registered for the class should be on Albert (the NYU official registration/grading site), Brightspace and Google Groups, and the three should be synced, but this is a university. What should be true in theory is not always the case in practice. I can do very little to alter the Google groups. If you are finding yourself locked out of the email list, start with IT, and if they won’t help, I will figure out a way to add you in. If you are a non-Stern student, and have an email address that does not end in@stern.nyu.edu, note that you were assigned a stern email address when you joined this class, and you should be able to find that address. Here is what I got from IT when I asked:
Since you are teaching a Stern course, all your students, exchange and non-Stern, are provided with a Stern account and Gmail.
You can have them all head over to 'start.stern.nyu.edu' to activate their account.

On a completely unrelated note, it may be a little early to be talking to me or the TAs, but here are the logistical details on office hours (for all of us) and the TA review sessions that will occur every week:
My office hours: In person, in KMEC 9-69, and on zoom (with links below)
My office hours:  You can come my office, in person, in KMEC 9-69 or on Zoom, since NYU is not allowing in-person yet, will be at:
12 pm- 1.15 pm, MW: https://nyu.zoom.us/j/97017751425 
I will add on more hours as we get closer to quizzes and exams and project due dates.
TA office hours

Alan and Can will be having office hours as well. I will leave it to them to reach out to you (and they already might have) will details.

Attachment: Capital IQ Access

A few quick notes. The first is that I did put up an in a tools webcast today. It is a very basic webcast on how to read a 10K, using P&G as my example. The links are below:
Downloadable video:  http://www.stern.nyu.edu/~adamodar/podcasts/Webcasts/Reading10Knew.mp4 
YouTube Video:   https://youtu.be/UzUJzdn7c2w?list=PLUkh9m2BorqmRAGzJb5OIvTAKZZu9HWF- 
P&G 10K: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/PG/Reading10KPG.pdf
P&G Valuation (excel spreadsheet): http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/PG/P&Gvaluationfixed.xls
It is a very old webcast,and I need to do a newer version, but I am way too lazy.

Second, for those of you who have already valued Tesla (the first valuation of the week), thank you! For those of you who have been putting it off, there is still time to add your input to the crowd:
If you scroll to the right, and towards the top, you will see the average and median values that the crowd has estimated. When you value a company, it is good to disagree with other people’s stories, as long as you are willing to replace them with your own. My Tesla post in January 2023 evoked a lot of responses and I wrote a post about disagreements that make sense and disagreements that violate first principles:

For those of you who are late to this party, we have run out of beer and chips, but you can read all of the emails that I have sent so far in the class:
Finally, I know that some of you are having trouble finding groups for the project work. I do have a group of two that is looking for additional members. If you are interested, I can connect you with them. 
I hope that you are enjoying your first weekend back at school. I will intrude with a couple of notes. 

1. Teaching Fellows/Review sessions: Just a reminder about the TAs for this class. There are two:
They will have office hours and a review session each week. The time and zoom link for the review sesision is on NYU classes.

3. Newsletter:  The first newsletter for the class is attached. As I said, re is usually not much news in these newsletters. Think of it more as a timeline for the class, telling you where we went last week and laying out our plans for the week ahead. If you get a chance, take a look at it. 

4. Need a group member?: It looks like the groups are jelling. If you find yourself still groupless and do not want to put yourself on the orphan list, please reach out to me. I may be able to find a group for you.

5. Lecture note packet 1: Finally, we will be starting with the first lecture note packet in class on Monday. Please have it with you for class. The pdf version can be found here:
If you have already downloaded it, please make sure that you did get the 2024 version, by looking at the cover page, which should say updated in 2024,

Have a great weekend! 

Attachment: Issue 1 (February 3)


First things first. This week, we will be delving into the mechanics of discount rates, starting with the risk free rate and then moving on to the equity risk premium. They are both central to valuation and we live in unusual times, where the former, in particular, is doing strange things. Second, we will be starting off tomorrow's class with the question of firm versus equity valuation. I am attaching the cash flow table that we will be using for the start-of-the-class test as well. If you get a chance, please take a look at it before you come into class. The question is at the bottom of the page. 

Attachment: Start of the class test for 2/5/24

Today's class started with a look at a major investment banking valuation of a target company in an acquisition and why having a big name on a valuation does not always mean that a valuation follows first principles, with the first principle being We began our intrinsic value discussion by talking about the weapons of mass distraction. If you want to read the blog post I have on the topic, try this link:
After setting the table for the key inputs that drive value - cash flows, growth, risk, we looked at the different ways of approaching valuation (Dividend Discount model, FCFE model, firm valuation) and the roots that they share, and how they result in different estimation processes. Next session, we will continue with a discussion of risk free rate, a foundational number that will drive the rest of our calculations. I have attached a post class test for today, with the solution. 

Attachments: Post-class test and solution.

At the outset, a quick note about office hours tomorrow. Since there ia faculty meeting from 12 pm - 1.30 pm, I will move the office hours to 9 am - 10 am. The zoom link for office hours remains unchanged. In this week, I would like to do a valuation that addresses a critique that I hear of intrinsic valuation, which is that we do not take intangible assets seriously enough, and under value companies with significant intangibles. That may be because the critics who make this argument mistake accounting for valuation, and it is true that accounting has done an absolutely abysmal job on intangible, even as accountants have become more obsessed with bringing intangibles on to the books. To see my response to this challenge, start with this blog post from last year:
As you will notice, the blog post was done at the time Birkenstock, the German company that makes ugly-looking, but comfortable, sandals, was planning to go public in late 2023. You can start with the Birkenstock prospectus:

You can then check out my valuation of Birkenstock:
In that valuation, I do come up with an aggregated valuation of Birkenstock, and then break out how much of that value comes from each of the four intangibles that I see in the company:
1. Brand Name: The company has built up a brand name through a collection of serendipitous events, including the hippies using its as a symbol of their contempt for the establishment in the 1970s, a 16-year old Kate Moss wearing it on a magazine cover in the 1990s and a rebirth as a fad on college campuses in the 1990s. 
2. Great Management: Birkenstock has been a family owned company for a century and a half, and about a decade ago had settled into slow growth maturity. At the time, the family turned the top management over to Olivier Reichert, who has proven to be adept at rediscovering growth, while preserving brand name power. That has allowed the company to find a rebirth of high growth.
3. Free Celebrity Advertising: In a world where companies pay fortunes to social-media celebrities, with little redeeming value, Birkenstock gets free advertising from celebrities who wear its products with no compensation. 
4. The Barbie Buzz: The company got lucky, when Barbie, the biggest gate-receipt movie in 2023, had Margot Robbie wear pink Birkenstock on screen. That caused a bump in sales in the summer, and drew in customers (young women) not traditionally a target market for Birkenstock.
I have fun valuing these intangibles, and I hope you try it too. In fact, a week after my valuation, Birkenstock did go public at a market capitalization of ____ (share price = ), about 10% higher than my estimated value. In the months since, the stock has slid back down to slightly under my valuation, but that proves nothing. I know that my valuation and the price will contaminate your valuation, but I would like you to try your best to do your own IPO valuation (as of September 2023). As with the Tesla valuation, you may be intimidated by what you are trying to do, but there is almost nothing technical in what I do. When you are done, please go to the Google shared spreadsheet:
We started the class with a discussion of structuring a DCF and the different groupings of risk, and why some types of risk matter more than others, before moving on torisk free rates, exploring why risk free rates vary across currencies and what to do about really low or negative risk free rates. The blog post below captures my thoughts on negative risk free rates:
If you want to see my updated perspective on risk free rates, try my blog post from this year, built around the inflation question is here:
I know that the notion that the Fed sets interest rates runs deep, and that you will be able find ways of explaining away contrary evidence, if you feel strongly enough, but I would encourage you to keep an open mind on this question,. Way too much money and resources have been wasted because of the Fed obsession over the last decade to not fight back. Finally, I am included the latest sovereign ratings from Moody;’s and the sovereign CDS spreads .

Attachments: Post-class test and solution.

By now, you should have a company picked, and if so, you can start thinking about at least the first two pieces of your discount rate calculation, a risk free rate and an equity risk premium. 
  1. Pick a company: I know that I have been hounding you to pick a company, but I cannot help myself. Please pick a company soon and when you do, please enter that company into the master list for the class: https://docs.google.com/spreadsheets/d/1lSuASQzSy3thXAW7ZnsyHgO3hAIV0LbAYIPyfGCDXMc/edit?usp=sharing 
  2. Riskfree Rate: Currency is a choice and you can choose to value your company in any currency, though the currency in which your financials are reported is a good place to start. Of course, if that currency happens to have a 100% inflation rate, you may rethink your choice. Once you have the currency, follow the template for computing a risk free rate. If your currency does not have a default free entity issuing it, you may need sovereign default spreads for ratings classes, and you can find them on my website. Here are some useful links:
    1. Government Bond Rates (in local currency): https://tradingeconomics.com/bonds 
    2. Sovereign Ratings: https://www.moodys.com/login?ReturnUrl=https%3a%2f%2fwww.moodys.com%2fviewresearchdoc.aspx%3fdocid%3dPBC_186519%26lang%3den%26cy%3dglobal (You will be asked to register, but it is free… And worth the giving up of your privacy. If you are worried about your privacy, that train has left the station anyway…)
    3. Sovereign CDS spreads: Try typing in SOVR into a Bloomberg terminal, if you can access it. If not, and you have been able to sign on to Capital IQ (I have attached the instructions again), you can get sovereign CDS spreads, though it may take a little exploring.
  3. Equity Risk Premiums: I will be going through my calculation of country risk premiums in class next week, and then moving on to implied equity risk premiums. In case, you are truly bored over this long weekend, you can read an annual update paper that I write on equity risk premiums every year. I am still working on this year’s version, but you can download the 2023 version by going to the link below: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4398884

Finally, if you are still groupless, reach out to me, and I will see if I can match you with a group. That’s about it for the moment.
2/9/24 It is Friday, andI  have put up the webcast for risk free rates on the webpage for the class. 

Risk free Rates
Additional material:

These sovereign CDS spreads and ratings are stale, and if you want updated versions, you can find them linked below. 
It will of course make more sense, if you have picked a company and have a currency to work with, but that is a nag for a different days II hope that you get a chance to watch the webcast!  Finally, I forgot to send you the first weekly challenge on Wednesday. It is the weekly challenge that tests you on valuation consistency, and it is entirely optional. If you choose to do it, the solution will be available online and you can check it. There is no need to submit it back to me. 

Attachments: Weekly challenge #1


1. It is time for some news (not really), but this is the second newsletter for the class.

Issue 2 (February 10)

2. Company choice & groups: I was checking the valuation master sheet:
I notice that a lot of you have not picked a company yet. If you have already and have just not entered the company name (not symbol), please do so. ‘

3. My post on the Mag(nificent) Seven: It is true that seven stocks (Apple, Alphabet, Amazon, Meta, Microsoft, Tesla and NVIDIA carried the market last year, adding $5.2 trillion to their market capitalization and accounting for 55% of the increase in market cap of all US equities in 2023). I just posted on these companies, why they have taken center stage and given that I have a valuation obsession, what I think about these companies today:
I hope that you are getting ready for a Super Bowl party, but as you watch the game, you may want to think about valuation questions. For instance, how much would you pay, if you were a network, for the rights to carry the Super Bowl in perpetuity? (Think of the questions you have to address to do this valuation, starting with whether the football can outlast its CTE challenge and continuing on to whether technology will allow watchers to completely bypass ads…) And if you are a company built around subscribers, say Amazon Prime or Netflix, would you outbid the ad-driven networks because you will use the Super Bowl to sign up new subscribers? Now that I have sowed those seeds that may prevent you from watch Patrick Mahomes throw the ball with his left hand while lying on his back (how does he do that?), two quick loose ends to tie up. 
  • First, I hope that you had a chance to watch the in-practice webcast on the risk free rate ). Second, I sent you a weekly challenge last Wednesday. I don’t know whether you had a chance to try, but it is still not too late. I have attached the solution to that weekly challenge (and the weekly challenge, in case you have no idea what I am talking about). 
  • Tomorrow, we will turn our attention to equity risk premiums, talking about forward-looking estimates and we will then move on to the cost of debt and capital. So, if you are shaky about any of those concepts, I hope that you are rock solid, by the end of the week.l

Attachment: Weekly Challenge #1 Solution


In the session today, we started by doing a brief test on country risk premiums. We started with an assessment of historical equity risk premiums, and why they are not good predictors of future equity risk premiums, before embarking on a discussion of country risk and how to deal with it, and measure it. If you are still confused about the different approaches to computing country risk premium, I hope this picture helps:

We also looked at company risk exposure to country risk, with my core argument being that a company’s exposure to country risk comes from where it dos business, not where it is incorporated:

After a brief foray into lambda, a more composite way of measuring country risk, we ended the session by talking about how you can estimate a forward-looking, dynamic equity risk premium. Post class test and solution attached. Until next time!

Attached: Post class test and solution

company that became the most valuable public company (in terms of market cap) over night, when it had its IPO in 2019. The place to start this valuation is with the Aramco IPO, a document written by bankers for bankers, and hence thoroughly boring:
You can follow up with two posts that I wrote at the time of the IPO:
1. http://aswathdamodaran.blogspot.com/2019/11/a-coming-out-party-for-worlds-most.html
2. http://aswathdamodaran.blogspot.com/2019/11/regime-change-and-value-follow-up-post.html 
Those posts include my valuation of Aramco, putting its value at about $1.6 trillion, roughly where it went public.

Clearly, much water has passed under this bridge in the last two years, and I have the updated numbers for Aramco through 2023 at the link below;
I have updated my Aramco valuation to reflect these updated numbers:

As you look at the what if questions, I would like you to focus on just three variables (my advice is you leave the rest alone):
  1. Expected growth rate; I have set it at the inflation rate, my expectation for how much oil prices will change on a year to year basis
  2. Remaining years: I have used 50, roughly the number of years before the oil under the ground is exhausted
These inputs can change to reflect what you think will happen to fossil fuels or the earth. If you believe that fossil fuel usage can be cut sharply, you can set the growth rate to a negative number and the number of years to less than 50. In short, this is about as pure a play as you can get on fossil fuels as you can get.
  1. Likelihood of regime change: I have set it at 20%, but your political instincts are undoubtedly better than mine and you can adjust this number up or down and come up with your valuation.
  2. Cost of capital: You can change the beta for the company, but this is not the make-or-break number in this valuation.
In short, this is a valuation where the differences we have are really about country/political risk and fossil fuels, not the company. if you feel up to it, please do go enter your updated valuations for Aramco, with the updated market cap of just over two trillion into the Google shared spreadsheet:
I told you at the start of the class that the material for this class would come at you hard and fast, and that it would feel like you were drinking from a hose. I know that some of you are feeling overwhelmed with the valuations of the week, the weekly challenges, the too-frequent emails, the blog posts.. I am sorry if I am drowning you, and I understand that you have other demands on your time, and you may be wondering how to prioritize keeping up with the class. I tried to do that below:






Day of class

1. Come to class (and if you cannot make it, watch the webcast as soon as you can, and certainly before the next class)


Evening of class

2. After the class, review the slides covered, any calculation done during the class and conceptual issues. If you want more detail, download the slides in PowerPoint forma, and read the notes page for the slides. (Links are on webcast page)


3. Do post-class test on webcast page(15 minutes)


Week of class


4. Apply concepts from week to project company (link to project page)


5. Work through a few practice problems from problem set (link) or past quizzes (link)



1.  Do weekly challenge for week (Wednesday)


2. Watch Valuation Tools webcast for week (Friday)


3. Do Valuation of the week (Check webcast page)


4. Read blog posts linked to in emails (Sporadic)


Take the time you have each week and see how far down this list you can get. I would obviously like you to do every valuation of the week and every weekly challenge, but that is unrealistic. In the weeks, you are stretched, you may never get to them. In other weeks, you might. Give it your best shot! That is all you can do.

2/14/24 In today’s class, we started by looking at implied equity risk premiums, why they move over time and how they are related to the prices of risk in other risky asset classes (bond and real estate). We then reviewed the pitfalls of regression betas. They are backward-looking, noisy and subject to game playing. We went on to talk about bottom up betas, focusing on defining comparable firms and expanding the sample. I did make a big deal about bottom up betas, but may have still not convinced you or left you hazy about some of the details. If so, I thought it might be simpler to just send you a document that I put together on the top ten questions that you may have or get asked about bottom up betas. I think it covers pretty much all of the mechanics of the estimation process, but I am sure that I have missed a few things.
One final note. There is no class next Monday and next week’s class (on Wednesday) will be an entirely zoom class. The link is below:
Also, today is Wednesday and I have the weekly challgenge for this week attached, and if you found the discussion of implied equity risk premiums and their relationships with other macro numbers interesting, you may find this challenge worthwhile.

T did send out a template yesterday about prioritizing what you do on this class, and I decided to present it in a slightly different format, which you may find easier to work with.

Busy, Multiple constraints on time including health, family etc.
Time available: <3 hours a week
1. Do post-class tests (10-15 minutes for each class)
2. Review lecture notes for the session (20-30 minutes for each class)
3. Bare minimum on project company valuation (30 minutes/week) & full-fledged catching up (2 hours every three weeks)
4. In quiz week, work through at least three or four past quizzes (2018-2022) (3 hours every three or four weeks)

Busy, Significant constraints on time 
Time available: 3-6 hours a week
1. Do post-class tests (10-15 minutes for each class)
2. Review lecture notes for the session (20-30 minutes for each class)
3. Watch Valuation Tools video each week (30 minutes/week)
4. Get numbers crunched on project company (1 hour/week)
5. In quiz week, work through at least six to eight past quizzes (2015-2022) (5 hours every three or four weeks)

Busy, but class is key priority
Time available: 6-10 hours a week
1. Do post-class tests (10-15 minutes for each class)
2. Review lecture notes for the session (20-30 minutes for each class)
3. Watch Valuation Tools video each week (30 minutes/week)
4. Get numbers crunched on project company & start narrative (1.5 hour/week)
5. Read and try the weekly challenge, with a time limit (30 minutes/week)
6. Give the valuation of the week a quick try  (30 minutes/week)
7.  Review practice problems for each section and try two or three in each section (30 minutes/week)
8. In quiz week, work through at least eight to ten past quizzes (2013-2022) (6 hours every three or four weeks)

Obsessed with this class
Time available: As many hours as needed
1. Do post-class tests (10-15 minutes for each class)
2. Review lecture notes for the session (20-30 minutes for each class)
3. Watch Valuation Tools video each week (30 minutes/week)
4. Get numbers crunched on project company & start narrative + help other group members (2.5 hour/week)
5. 5. Read and try the weekly challenge, without a time limit (1 hour/week)
6. Give the valuation of the week a solid try  (1 hour/week)
7. Review practice problems for each section and try four or five in each section (1 hour/week)
8. In quiz week, work through all past quizzes (1997-2022) (8 hours every three or four weeks)
9. Read stories in financial press, and craft your corporate finance response to each story (continuous)

Attachments: Post class test and solution, Implied premium challenge & data

First things first. By now, I hope that you are in a group and have picked a company. If so, please complete the process by going to the master spreadsheet for the class and input your company name:

At this stage in the class, you should be able to complete three basic tasks related to discount rates, estimating risk free rates, equity risk premiums and betas. Along the way, you have to get comfortable with how to estimate implied equity risk premiums, and to further you on that path, I will be posting valuation tools webcasts on estimating implied equity risk premiums and company exposure to equity risk.  I know that the numbers will start mounting up and that some of you are building or are planning to build your own spreadsheets. For your sake and mine, I would push you not to build your own spreadsheet and use mine instead (or do both, to see if you get similar numbers):
It is not because I have good spreadsheet skills. Far from it, since I have never used an Excel macro and use only bare bones functions. It is because this spreadsheet has 
(a) a structure tied to how we think about intrinsic value in this class, which is very different from how bankers and appraisers think about valuation built around “less detail” and a connection to story. (There is a story sheet built into the spreadsheet that forces you to tie your assumptions to the story)
(b) has industry-average data built into a worksheet. Hence, tasks like building up to a cost of capital are simplified by using lookup tables and estimating numbers like margins can be done with perspective
(c) The spreadsheet has built in safeguards to prevent you from making fatal errors that can handicap your valuation. In fact, the whole list of questions that you will see at the end of the input page are questions that allow you to break the default assumptions, but do so cautiously.
I just created an updated video guide (the one on my webpage is a little old) on how to use the spreadsheet, and it is at the link below:
I am sorry if my voice sounds ragged, but I just got off a long flight and my throat has been scratchy for a couple of days.
This spreadsheet is also versatile and will work for any non-financial service company, small or large, US or emerging markets, young growth or in decline. I have used it to value companies that range the spectrum from Uber in 2013, when it was a young start up, to Bed, Bath and Beyond last year. You are welcome to add detail to the spreadsheet, as long as you don’t break it. Thus, for Peloton, you can break revenues down into equipment and subscriptions, and for NVIdia into Ai chips and the rest of the chip business.  if you feel that there are different stories for each one that you want to tell. Just add tow rows on to of the valuation output page, and make them the revenues from each segment. In fact, the minute you start using it, it is your model, not mine, and you are welcome to claim ownership of it, if that makes you happy. Finally, my push to get you to use my spreadsheet is also purely selfish . This spreadsheet is easy for me to check, since I know exactly where to look to see how your assumptions are playing out and the mistakes that you might have made at the input stage. 

If you have a financial service company (bank, investment bank, insurance company), the spreadsheet above will not work well. Instead, try this spreadsheet:
It is a dividend discount model, but one with enough flex built into it that you can use it to value a growing bank that may not currently be paying dividends. A little later in the class, I will offer you a variant of a free cash flow equity model built just for banks, but for the moment, the dividend discount model will do. 
This week in class, we moved from risk free rates to looking at equity risk premiums and beta. This week, I have added two tools webcasts.

1. Implied Equity Risk Premiums
If you are intrigued or curious or even just bored, I have attached the most recent implied ERP calculation from the start of February 2024, and you can try updating it for where the index and rates are now.
2. Company Equity Risk Premium
If you remember, we started this discussion in class by looking at how to measure company risk exposure to country risk, using Embraer, Ambev and Coca Cola, using revenue weights, and then looking at Royal Dutch, where we used oil production weights. In this week’s valuation tool’s webcast, I look at estimating a company’s risk exposure to country risk.
Webcast: https://youtu.be/D3IGn6tH03c?list=PLUkh9m2BorqkNIdjpZY2kI0qzRbEv5F5L
Slides: https://people.stern.nyu.edu/adamodar/pdfiles/blog/ERPforCompany.pdf
Supporting data: https://www.stern.nyu.edu/~adamodar/pc/datasets/ERP&GDP.xls
Of course, the table you see in this webcast with GDP and ERP is an old one, and you can get the updated version here:
Give it a look, when you get a chance. 

Finally, I know that the quiz is not until February 28, but just in case you get the urge to start working on these quizzes (you should be able to do problems 1 and 2 on most of the recent quizzes),  I have a webcast that I have put together where I take you through the material that will be covered on the quiz. It is about 35 minutes long and it may help you get ready for the quiz (or not)… 
Webcast: http://www.stern.nyu.edu/~adamodar/podcasts/Webcasts/valquiz1review.mp4
Slides: http://www.stern.nyu.edu/~adamodar/pptfiles/val3E/valquiz1review.pptx
The past quizzes are at the links below:
If the links don’t work, try a different browser.

Last week, we continued on our discussion of discount rates by looking at how best to estimate the equity risk premium. This coming week, we have only one session on Wednesday, and it will be a zoom session. In that session,  we will complete the discussion of cost of capital, and start on the meat and potatoes part of valuation, which is cash flows.

Attachment: Issue 3 (February 17)

As you can see from the heading, this is an email to all my classes, and it is about how to collect data, without getting overwhelmed by it. In particular, I want to focus on, and provide some help on data from three sources: the company itself (annual reports, financial filings), Capital IQ (a database of all publicly traded companies, with immense amounts of accounting and market data on each) and the physical Bloomberg terminals that are in the business school:
1. The Company: About 75% of the information, perhaps more, still come from annual reports and financial filings made by the company and the best source for this information is in the original documents (rather than on online sources, no matter how sophisticated). I usually start by finding the company’s webpage, going to the investor section and finding the most recent annual and quarterly report, as well as the analogous financial filings (10K and 10Q for US companies). Download them in pdf format, because you can then use the search box to search for the data you need in the pdf. (Warning: Do not read the annual report, until you are ready in terms of what data you want from the report)
2. Capital IQ: I have sent you many reminders that you have access to S&P Capital IQ. It is one of the premier global corporate datasets, and given how expensive it is to access, we are lucky to have access at Stern. 

Capital IQ Access

If you have not already done so, access Cap IQ, find your company, and it is pretty self-explanatory. I just download into excel the income statement, the balance sheets, the cash flow statement and the segment data, and I replace the default time period (which is the last few years with the maximum period, which can 30 years or more for some companies). You now have all of the historical data that you will need for your company. While you are in Capital IQ, you can also check out the industry grouping that your company is in, screen for other companies like it (by industry group, geography, market cap etc.) and download the data you might need on those companies (I would start with betas, market capitalizations, total debt and cash, but you may need to come back to this list again later in the class). I put together a YouTube video on how to do this, if you are interested:

3. Bloomberg terminal: Find the Bloomberg terminals in the building; for MBAs, there are four on the fourth floor of KMEC, and for undergraduates, there are four  in Tisch 316 (accessed through 305). Since these are scarce, and hogging the machines is not a good idea, I thought I would create a guide specifying not only what you need to print off for your company, as well as where to find data on those print outs. I used BP as my company, and the print out should reflect what the pages should look like now for your company:

Bloomberg Data Guide

You will note that there are only six Bloomberg groupings you should print out, ten pages, in all. 
HDS: Just the first page
BETA: One page
DES: Five pages
DDIS: One page
CRPR: One page
FA: One page
If you play this right, it should take you 10-15 minutes for your company, and you should do it as soon as you can. I know that this is my second email to you today, but to compensate, I will skip emailing you tomorrow and day after. See.. I am a compassionate person. 
Before I dive into the valuation of the week for this week, a reminder again that tomorrow’s class will be on zoom and the zoom link is below:
See you in class at the regular time (1.30 pm - 2.50 pm)

One area where people have rightfully taken issue with me is that I don’t often value banks. That is true, and it is not because I want to avoid them for being difficult, but because they are boring. That said, I thought this week would be a good one to value a bank, since some of you are valuing financial service companies. The bank that I chose was JP Morgan Chase, the largest bank in the US and the one with the most visible and high-profile CEO in Jamie Dimon. In case you are on the watch out for bias, I do own shares in JPM but as a customer (a positive bias), I absolutely despise its service (a negative). You can read my valuation narrative in this file:
You can download the updated financials for the bank at this link:
You can also download my valuation of JPM at this link:
The spreadsheet I use is the divginzu spreadsheet that I sent you a link for last week (if you downloaded it then, please download it again, since I tweaked a few details). If you get a chance, try your hand at valuing JPM and enter your value into the Google shared spreadsheet:
‘I know that you don’t have much time, but this is truly one of the simpler valuations that you will see. Give it a shot! 
interested in getting updated default spreads (on the cheap or free), try this site:
Click on PBR and that link will give you end spreads, they do update the numbers monthly, but seem to do an awfully poor job of making the spreadsheet findable. You can also try the St. Louis FRED and find updated on seven major ratings classes (AAA, AA, A, BBB, BB, B, C and lower) updated daily. Neat, right? You can get the spreads from Bloomberg as well, using the FIW function, and tweaking the choices to show all corporate spreads.

We then started on our discussion of free cashflows, with an examination of the differences between free cash flows to equity and free cash flow to the firm. If you are still confused, I do have a post on free cash flows that I did a couple of years ago that might help:

A reminder again that we will be back in class on Monday and that your quiz is next Wednesday. No new weekly challenge this week, but please work on the one that I sent you last week. On the quiz front, please remember that all past quizzes and solutions can be accessed here:
The review session links are below:
Slides: http://www.stern.nyu.edu/~adamodar/pptfiles/val3E/valquiz1review.pptx
 As you get ready for the quiz, I am sure you will have questions, and if you do, I will have office hours from 4.30 pm - 6 pm on Tuesday (February 27) and the zoom link is below:
I will see you there.  

Attachments: Post class test and solution