Part III

Valuation

In this part of the book we will apply the methods shown in Part II to value both real and financial assets. While the fundamental value of any asset is the expected future cash flows discounted at its risk-adjusted cost of capital, the path to finding the cash flows and discount rates differs across asset classes. Stocks yield little or no cash flow, but can be very valuable. A bond that promises double-digit coupons can be worth very little. A property with low running yield can be worth more than a higher-yielding property. The aim of part III, then, is to show how you can make the proper analysis in this respect, with, of course, helpful Excel spreadsheets.

In chapter 9 we revert to capital budgeting as in chapter 7, but ...

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