| Session (Click here) |
Topics covered |
Lecture notes |
|
Introduction to Class
Philosophical Basis for Valuation
|
Syllabus for class
Project Description
Introduction
to Valuation (Pg 1-4) |
|
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
Solution |
|
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) |
|
Betas
- 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 |
|
Dealing with hybrids
Estimating Cashflows
- The importance of updating
- Dealing with operating leases
- Dealing with R&D |
Packet 1: 77 - 96 |
|
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
Solution |
|
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
Solution |
|
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 |
|
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
Solution |
|
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 |
|
Equity Options: Effect on Value
Valuations
- 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
Solution |
|
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 |
|
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
Solution |
|
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 |
|
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 |
|
PE Ratio - Market wide regression
PEG Ratio
- Definition
- Analysis
Value Multiples
|
Packet 2: 37-78 |
|
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
Solution |
|
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 |
|
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
Solution |
|
Introduction to Real Options
- Three key questions for real options
- The option to delay
- Valuing a patent |
Packet 3: 1-31 |
|
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
Solution |
|
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 |
|
Valuing equity in distressed companies - Estimating inputs
Acquirer's Anonymous - Seven errors in acquisitioin valuatioin |
Packet 3: 90-120 |
|
Final tests on acquisitions
Value Enhancement
- Versus Price Enhancement
- Ways of enhancing value
- Expected value of control |
Packet 3: 121-151 |
|
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. |
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