Lecture 7- Valuation methods

Standard valuation techniques include: , , &

Book value assumes value is equal to value of . It's used & accepted method due to certification by , while also being perhaps most

One advantage of using book value as valuation method is it’s to use

One disadvantage of using book value as valuation method is it's based on , ignores

Another disadvantage of using book value as valuation method is it's based on that are potentially & subject to

Third disadvantage of using book value as valuation method is it

Fourth disadvantage of using book value as valuation method is it ignores which are difficult to & therefore not all in balance sheet

Dividend growth model assumes value is equal to value of

One advantage of using dividend growth model as valuation method is it’s to apply, especially if model is assumed

One disadvantage of using dividend growth model as valuation method is are based on

Another disadvantage of using dividend growth model as valuation method is it assumes grow at which may not be case

Third disadvantage of using dividend growth model as valuation method is it does not for companies that do not

Multiples method is very for valuing . It uses from another company (or average of group of companies) in with an measure (or other return measures) of company for which calculation is required

One advantage of using multiples method as valuation method is it’s to use

Another advantage of using multiples method as valuation method is it makes

Third advantage of using multiples method as valuation method is if are really then it would work

One disadvantage of using multiples method as valuation method is used in most methods are

Another disadvantage of using multiples method as valuation method is are subject to

Third disadvantage of using multiples method as valuation method is it often ignores

One widely used multiple is . It is calculated as divided by

Another widely used multiple is . It is calculated as divided by

Third widely used multiple is of to . It is calculated as divided by

Fourth widely used multiple is . It is calculated as divided by

Fifth widely used multiple is . It is calculated as divided by

First step of discounted cash flow valuation is forecast up to some . Second step is to estimate (i.e. continuing ) which equals value after . Third step is to estimate (i.e. rate). Fourth step is to to

EBITDA =

EBIT =

EBT =

Net income or net earnings =

CFO or OCF =

Free cash flow to firm (FCFF)- Cash flow to , & debtholders. If FCFF is used that belongs to both shareholders & bondholders use as discount rate. Discounting FCFF at cost of equity will yield biased estimate of of firm

Free cash flow to equity (FCFE)- FCFE is used that belong to shareholders use cost of equity only which can be using model, model (such as model & theory) & model. Discounting FCFE using WACC will lead to an biased estimate of of equity

When estimating firm’s terminal value, assume grow at after

Ways of estimating earnings growth are: to look at ( growth in is typical starting point), to look at what are (other may be using you do not have & it is often useful to know what their are) & to look at (how much are they ? what is on their ?)

One advantage of using discounted cash flows as valuation method is it should be to market moods & perceptions if done by being based upon an

Another advantage of using discounted cash flows as valuation method is if investors buy , rather than , DCF valuation is way to think about what you are getting when you buy an

Third advantage of using discounted cash flows as valuation method is DCF valuation forces you to think about of firm & understand its . It helps you you have made

One disadvantage of using discounted cash flows as valuation method is it requires far more & than other valuation approaches as it attempts to (perceived or calculated value)

Another disadvantage of using discounted cash flows as valuation method is & are difficult to & can be by analyst to provide he or she wants

DCF valuation is easiest to use for assets (firms) whose cashflows are , can be with some for periods & where proxy for that can be used to obtain is available