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Investment Valuation: Tools and Techniques for Determining the Value of Any Asset, Third Edition

by Aswath Damodaran

April 2012

Intermediate to advanced

992 pages

34h 17m

English

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Contents

A PHILOSOPHICAL BASIS FOR VALUATIONGENERALITIES ABOUT VALUATIONTHE ROLE OF VALUATIONCONCLUSIONQUESTIONS AND SHORT PROBLEMS
DISCOUNTED CASH FLOW VALUATIONRELATIVE VALUATIONCONTINGENT CLAIM VALUATIONCONCLUSIONQUESTIONS AND SHORT PROBLEMS
THE BASIC ACCOUNTING STATEMENTSASSET MEASUREMENT AND VALUATIONMEASURING FINANCING MIXMEASURING EARNINGS AND PROFITABILITYMEASURING RISKOTHER ISSUES IN ANALYZING FINANCIAL STATEMENTSCONCLUSIONQUESTIONS AND SHORT PROBLEMS

WHAT IS RISK?EQUITY RISK AND EXPECTED RETURNALTERNATIVE MODELS FOR EQUITY RISKA COMPARATIVE ANALYSIS OF EQUITY RISK MODELSMODELS OF DEFAULT RISKCONCLUSIONQUESTIONS AND SHORT PROBLEMS
BASICS OF OPTION PRICINGDETERMINANTS OF OPTION VALUEOPTION PRICING MODELSEXTENSIONS OF OPTION PRICINGCONCLUSIONQUESTIONS AND SHORT PROBLEMS
MARKET EFFICIENCY AND INVESTMENT VALUATIONWHAT IS AN EFFICIENT MARKET?IMPLICATIONS OF MARKET EFFICIENCYNECESSARY CONDITIONS FOR MARKET EFFICIENCYPROPOSITIONS ABOUT MARKET EFFICIENCYTESTING MARKET EFFICIENCYCARDINAL SINS IN TESTING MARKET EFFICIENCYSOME LESSER SINS THAT CAN BE A PROBLEMEVIDENCE ON MARKET EFFICIENCYTIME SERIES PROPERTIES OF PRICE CHANGESMARKET REACTION TO INFORMATION EVENTSMARKET ANOMALIESEVIDENCE ON INSIDERS AND INVESTMENT PROFESSIONALSCONCLUSIONQUESTIONS AND SHORT PROBLEMS
THE RISK-FREE RATEEQUITY RISK PREMIUMDEFAULT SPREADS ON BONDSCONCLUSIONQUESTIONS AND SHORT PROBLEMS
THE COST OF EQUITY AND CAPITALCOST OF EQUITYFROM COST OF EQUITY TO COST OF CAPITALBEST PRACTICES AT FIRMSCONCLUSIONQUESTIONS AND SHORT PROBLEMS
ACCOUNTING VERSUS FINANCIAL BALANCE SHEETSADJUSTING EARNINGSCONCLUSIONQUESTIONS AND SHORT PROBLEMS
THE TAX EFFECTREINVESTMENT NEEDSCONCLUSIONQUESTIONS AND SHORT PROBLEMS
THE IMPORTANCE OF GROWTHHISTORICAL GROWTHANALYST ESTIMATES OF GROWTHFUNDAMENTAL DETERMINANTS OF GROWTHQUALITATIVE ASPECTS OF GROWTHCONCLUSIONQUESTIONS AND SHORT PROBLEMS
CLOSURE IN VALUATIONTHE SURVIVAL ISSUECLOSING THOUGHTS ON TERMINAL VALUECONCLUSIONQUESTIONS AND SHORT PROBLEMS
THE GENERAL MODELVERSIONS OF THE MODELISSUES IN USING THE DIVIDEND DISCOUNT MODELTESTS OF THE DIVIDEND DISCOUNT MODELCONCLUSIONQUESTIONS AND SHORT PROBLEMS
MEASURING WHAT FIRMS CAN RETURN TO THEIR STOCKHOLDERSFCFE VALUATION MODELSFCFE VALUATION VERSUS DIVIDEND DISCOUNT MODEL VALUATIONCONCLUSIONQUESTIONS AND SHORT PROBLEMS
FREE CASH FLOW TO THE FIRMFIRM VALUATION: THE COST OF CAPITAL APPROACHFIRM VALUATION: THE ADJUSTED PRESENT VALUE APPROACHEFFECT OF LEVERAGE ON FIRM VALUECost of Capital and Optimal LeverageADJUSTED PRESENT VALUE AND FINANCIAL LEVERAGECONCLUSIONQUESTIONS AND SHORT PROBLEMS
VALUE OF NONOPERATING ASSETSFIRM VALUE AND EQUITY VALUEMANAGEMENT AND EMPLOYEE OPTIONSVALUE PER SHARE WHEN VOTING RIGHTS VARYCONCLUSIONQUESTIONS AND SHORT PROBLEMS
USE OF RELATIVE VALUATIONSTANDARDIZED VALUES AND MULTIPLESFOUR BASIC STEPS TO USING MULTIPLESRECONCILING RELATIVE AND DISCOUNTED CASH FLOW VALUATIONSCONCLUSIONQUESTIONS AND SHORT PROBLEMS
PRICE-EARNINGS RATIOTHE PEG RATIOOTHER VARIANTS ON THE PE RATIOENTERPRISE VALUE TO EBITDA MULTIPLECONCLUSIONQUESTIONS AND SHORT PROBLEMS
PRICE-TO-BOOK EQUITYAPPLICATIONS OF PRICE–BOOK VALUE RATIOSUSE IN INVESTMENT STRATEGIESVALUE-TO-BOOK RATIOSTOBIN'S Q: MARKET VALUE/REPLACEMENT COSTCONCLUSIONQUESTIONS AND SHORT PROBLEMS
REVENUE MULTIPLESSECTOR-SPECIFIC MULTIPLESCONCLUSIONQUESTIONS AND SHORT PROBLEMS
CATEGORIES OF FINANCIAL SERVICE FIRMSWHAT IS UNIQUE ABOUT FINANCIAL SERVICE FIRMS?GENERAL FRAMEWORK FOR VALUATIONDISCOUNTED CASH FLOW VALUATIONASSET-BASED VALUATIONRELATIVE VALUATIONISSUES IN VALUING FINANCIAL SERVICE FIRMSCONCLUSIONQUESTIONS AND SHORT PROBLEMS
NEGATIVE EARNINGS: CONSEQUENCES AND CAUSESVALUING NEGATIVE EARNINGS FIRMSCONCLUSIONQUESTIONS AND SHORT PROBLEMS
INFORMATION CONSTRAINTSNEW PARADIGMS OR OLD PRINCIPLES: A LIFE CYCLE PERSPECTIVEVENTURE CAPITAL VALUATIONGENERAL FRAMEWORK FOR ANALYSISVALUE DRIVERSESTIMATION NOISEIMPLICATIONS FOR INVESTORSIMPLICATIONS FOR MANAGERSTHE EXPECTATIONS GAMECONCLUSIONQUESTIONS AND SHORT PROBLEMS
WHAT MAKES PRIVATE FIRMS DIFFERENT?ESTIMATING VALUATION INPUTS AT PRIVATE FIRMSVALUATION MOTIVES AND VALUE ESTIMATESVALUING VENTURE CAPITAL AND PRIVATE EQUITY STAKESRELATIVE VALUATION OF PRIVATE BUSINESSESCONCLUSIONQUESTIONS AND SHORT PROBLEMS
BACKGROUND ON ACQUISITIONSEMPIRICAL EVIDENCE ON THE VALUE EFFECTS OF TAKEOVERSSTEPS IN AN ACQUISITIONTAKEOVER VALUATION: BIASES AND COMMON ERRORSSTRUCTURING THE ACQUISITIONANALYZING MANAGEMENT AND LEVERAGED BUYOUTSCONCLUSIONQUESTIONS AND SHORT PROBLEMS
REAL VERSUS FINANCIAL ASSETSDISCOUNTED CASH FLOW VALUATIONCOMPARABLE/RELATIVE VALUATIONVALUING REAL ESTATE BUSINESSESCONCLUSIONQUESTIONS AND SHORT PROBLEMS
CASH-FLOW-PRODUCING ASSETSNON-CASH-FLOW-PRODUCING ASSETSASSETS WITH OPTION CHARACTERISTICSCONCLUSIONQUESTIONS AND SHORT PROBLEMS
THE OPTION TO DELAY A PROJECTVALUING A PATENTNATURAL RESOURCE OPTIONSOTHER APPLICATIONSCONCLUSIONQUESTIONS AND SHORT PROBLEMS
THE OPTION TO EXPANDWHEN ARE EXPANSION OPTIONS VALUABLE?VALUING A FIRM WITH THE OPTION TO EXPANDVALUE OF FINANCIAL FLEXIBILITYTHE OPTION TO ABANDONRECONCILING NET PRESENT VALUE AND REAL OPTION VALUATIONSCONCLUSIONQUESTIONS AND SHORT PROBLEMS
EQUITY IN HIGHLY LEVERED DISTRESSED FIRMSIMPLICATIONS OF VIEWING EQUITY AS AN OPTIONESTIMATING THE VALUE OF EQUITY AS AN OPTIONCONSEQUENCES FOR DECISION MAKINGCONCLUSIONQUESTIONS AND SHORT PROBLEMS
VALUE-CREATING AND VALUE-NEUTRAL ACTIONSWAYS OF INCREASING VALUEVALUE ENHANCEMENT CHAINCLOSING THOUGHTS ON VALUE ENHANCEMENTCONCLUSIONQUESTIONS AND SHORT PROBLEMS
ECONOMIC VALUE ADDEDCASH FLOW RETURN ON INVESTMENTA POSTSCRIPT ON VALUE ENHANCEMENTCONCLUSIONQUESTIONS AND SHORT PROBLEMS
SCENARIO ANALYSISDECISION TREESSIMULATIONSAN OVERALL ASSESSMENT OF PROBABILISTIC RISK-ASSESSMENT APPROACHESCONCLUSIONQUESTIONS AND SHORT PROBLEMS
CHOICES IN VALUATION MODELSWHICH APPROACH SHOULD YOU USE?CHOOSING THE RIGHT DISCOUNTED CASH FLOW MODELCHOOSING THE RIGHT RELATIVE VALUATION MODELWHEN SHOULD YOU USE THE OPTION PRICING MODELS?CONCLUSION
Chapter 1 Introduction to ValuationChapter 2 Approaches to ValuationChapter 3 Understanding Financial StatementsChapter 4 The Basics of RiskChapter 5 Option Pricing Theory and ModelsChapter 6 Market Efficiency—Definitions, Tests, and EvidenceChapter 7 Riskless Rates and Risk PremiumsChapter 8 Estimating Risk Parameters and Costs of FinancingChapter 9 Measuring EarningsChapter 10 From Earnings to Cash FlowsChapter 11 Estimating GrowthChapter 12 Closure in Valuation: Estimating Terminal ValueChapter 13 Dividend Discount ModelsChapter 14 Free Cash Flow to Equity Discount ModelsChapter 15 Firm Valuation: Cost of Capital and Adjusted Present Value ApproachesChapter 16 Estimating Equity Value per ShareChapter 17 Fundamental Principles of Relative ValuationChapter 18 Earnings MultiplesChapter 19 Book Value MultiplesChapter 20 Revenue Multiples and Sector-Specific MultiplesChapter 21 Valuing Financial Service FirmsChapter 22 Valuing Firms with Negative EarningsChapter 23 Valuing Young or Start-Up FirmsChapter 24 Valuing Private FirmsChapter 25 Acquisitions and TakeoversChapter 26 Valuing Real EstateChapter 27 Valuing Other AssetsChapter 28 The Option to Delay and Valuation ImplicationsChapter 29 The Options to Expand and to Abandon: Valuation ImplicationsChapter 30 Valuing Equity in Distressed FirmsChapter 31 Value Enhancement: A Discounted Cash Flow Valuation FrameworkChapter 32 Value Enhancement: Economic Value Added, Cash Flow Return on Investment, and Other ToolsChapter 33 Probabilistic Approaches in ValuationChapter 34 Overview and Conclusion

Content preview from Investment Valuation: Tools and Techniques for Determining the Value of Any Asset, Third Edition

Contents

CHAPTER 1 Introduction to Valuation

A Philosophical Basis for Valuation

Generalities about Valuation

The Role of Valuation

Questions and Short Problems

CHAPTER 2 Approaches to Valuation

Discounted Cash Flow Valuation

Relative Valuation

Contingent Claim Valuation

Questions and Short Problems

CHAPTER 3 Understanding Financial Statements

The Basic Accounting Statements

Asset Measurement and Valuation

Measuring Financing Mix

Measuring Earnings and Profitability

Other Issues in Analyzing Financial Statements

Questions and Short Problems

CHAPTER 4 The Basics of Risk

Equity Risk and Expected Return

Alternative Models for Equity Risk

A Comparative Analysis of Equity Risk Models

Models of Default Risk

Questions and Short Problems

CHAPTER 5 Option Pricing Theory and Models

Basics of Option Pricing

Determinants of Option Value

Option Pricing Models

Extensions of Option Pricing

Questions and Short Problems

CHAPTER 6 Market Efficiency—Definition, Tests, and Evidence

Market Efficiency and Investment Valuation

What Is an Efficient Market?

Implications of Market Efficiency

Necessary Conditions for Market Efficiency

Propositions about Market Efficiency

Testing Market Efficiency

Cardinal Sins in Testing Market Efficiency

Some Lesser Sins That Can Be a Problem

Evidence on Market Efficiency

Time Series Properties of Price Changes

Market Reaction to Information Events

Market Anomalies

Evidence on Insiders ...

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Publisher Resources

ISBN: 9781118011522Purchase book