4
Valuation of the Firm
OBJECTIVES
To explain the various concepts of a firm’s valuation
To show how the value of bonds is measured
To analyse the factors influencing bond valuation
To show how preference shares are valued To explain the valuation of ordinary shares
The concept of valuation lies at the root of corporate financial decisions. Unless and until the finance manager is aware of the concept of valuation, it is difficult for him to evaluate whether the different financial decisions have actually added to the corporate wealth. Such an evaluation is significant not just for the finance manager. The other parties related to the company, viz., the shareholders and the creditors, would also like to know the value of the company insofar ...
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