Web Casts: Equity Instruments - Spring 2007

This 26-session equity valuation class will be taped starting January 22, 2007 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 (276 pages). If you prefer two slides per page, click here. (Updated for Spring 2007 class)
Part II: Relative Valuation and Private Company Valuation (228 pages) (If you prefer two slides per page, click here) (Updated for Spring 2007 class)
Part III: Real Options, Acqusition Valuation and Value Enhancement (172 pages) If you prefer two slides per page, click here.(Updated for Spring 2007 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 (1/22/07) Introduction to Class
Approaches to Valuation

Syllabus for class
Project Description
Introduction to Valuation

2 (1/24/07) Approaches to Valuation (continued)
Discounted Cashflow Valuation: Equity versus Firm
Introduction to Valuation
Packet 1 (1-8)
Weekly Challenge # 1 Reconciling firm and equity valuation Weekly challenge
3 (1/29/07) More on firm vs equity valuation
The Riskfree Rate
Historical Risk Premiums
Country Risk Premiums
Kennecott cashflow exhibit
Packet 1 (9-31)
4 (1/31/07) Company Exposure to country risk
Implications for multinationals
Implied Equity Risk Premium
Introduction to Betas
Packet 1 (32-56)
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 (2/5/07) Bottom up Betas
Cost of Debt
Weights for Cost of Capital
Dealing with hybrids
Packet 1 (57-80)
6 (2/7/07)

Getting earnings right
- Updated numbers
- Normalizing earnings (dealing with lossees)
- Adjusting for leases and R&D
- The Right Tax Rate

Packet 1 (81-98)
Weekly Challenge # 3

Adjusting Operating Earnings

Weekly challenge
7 (2/12/07) Reinvestment needs - Cap ex and working capital
Debt cashflows and Cash flow to Equity
Historical Growth Rates
Packet 1 (99-120)
8 (2/14/07)

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

Analyst Estimate of Growth
Fundamental Growth in EPS
Fundamental Growth in Equity Earnings

Packet 1 (121-139)
9 (2/21/07) Fundamental growth in Operating Income
Revenues and Margins: High Growth Firms
The terminal value computation
Packet 1 (140-162)
Weekly Challenge # 4A Terminal Value Mechanics Weekly challenge
Weekly Challenge # 4 Estimating fundamental growth Weekly challenge
10 (2/26/07) Terminal Value Dynamics
Loose Ends in Valuation
- The value of cash
- The value of cross holdings
- Other Assets
- Complexity
Packet 1 (163-180)
Growth and Value (McKinsey article)
11 (2/28/07) Loose Ends in Valuation (continued)
- Complexity (contd)
- What is debt?
- Management Options and Restricted Stock
Packet 1 (181-206)
Weekly Challenge # 5 Dealing with management options Weekly challenge
12 (3/5/07) Valuation Examples
- Dividend Discount Model and Implied Growth Rates
- Valuing the entire market
- FCFE Models and Emerging Market Risk
Packet 1 (207- 237)
13 (3/7/07) More on FCFF Models
- Circular Reasoning in DCF models
- The value of corporate governance
- Valuing distresssed companies
- Valuing young companies
Packet 1 (238- 267)
Weekly Challenge # 6 Circular Reasoning in DCF valuation Weekly Challenge
Daimler valuation
14 (3/19/07) Valuing Amazon and Google
Relative Valuation: Introduction
Four Steps to Deconstructing Multiples
Packet 1 (268-276)
Packet 2 (1-12)
15 (3/21/07) PE Ratios
- Definition
- Description
- Analysis
- Applications (Emerging Markets, Markets over time, Individual companies)
Packet 2 (13-42)
16 (3/26/07) Take the second quiz and check out the solution as well as the distribution of grades for the class.
PE ratio regression for the market
Comparing PE to Expected Growth
PEG Ratios
Packet 2(43-66)
17 (3/28/07) More on PEG Ratios
EV Multiples (FCFF, EBIT and EBITDA)
EV/EBITDA Multiples
Packet 2 (67-113)
Weekly Challenge # 7 Analyzing the PEGY ratio Weekly challenge
18 (4/2/07) Book Value Multiples
Revenue Multiples
Packet 2 (114-153)
19 (4/4/07) The value of a brand name
Choosing the Right Multiple
Reconciling Sector and Market Valuations
Private company valuation: Cost of equity
Packet 2 (154-186)
Weekly Challenge # 8 Relative Valuation versus DCF valuation Weekly challenge
20 (4/9/07) Private company valuation: Cash flows
Illiquidity and its costs
The value of control
Packet 2 (187-224)
21 (4/11/07) The allure of real options
Why real options have value
Three key questions about real options
The Option to Delay and the value of a patent
Packet 3 (1-31)
Weekly Challenge # 9 Valuing Private companies Weekly challenge
22 (4/16/07) Take the third quiz and check out the solution as well as the distribution of grades for the class.
Valuing biotechnology companies
Valuing natural resource options
The option to expand
Packet 3 (32-53)
23 (4/18/07) Key questions on the option to expand
The option to abandon
The value of financing flexibility
Equity in troubled firms as an option
Packet 3 (54-99)
24 (4/23/07) Motives for acquisitions
The value of control
The value of synergy
Packet 3 (100-135)
25 (4/25/07) More on the value of synergy and evidence
Value Enhancment 101
Packet 3 (136-End)
26 ( 4/30/07) Closing Thoughts and Valuation Summaries Closing presentation
Take the final exam and check the solutions.