The value of any investment depends on its cash flows. Chapter 9 stocks and their valuation common stock valuation 1. Consider that the average dividend yield for largecompany stocks is about 2 percent. Accordingly, common stock valuation attempts the difficult task of predicting the future. Chapter 8 stock valuation and investment decisions learning goals after studying this chapter, you should be able to. Final company analysis and stock valuation free download as powerpoint presentation. Pdf chapter 14 stock market valuation of patent portfolios. The book combines finance and accounting concepts into discussion providing the evenness of subject matter treatment, consistency of notation, and continuity of topic coverage. Fundamental analysis, especially company analysis is dealt in detail in this chapter.
Chapter 12 investment analysis national credit union. Lg 2 discuss the concepts of intrinsic value and required rates of return, and note. Valuation for mergers and acquisitions second edition barbara s. Generally, the value of an asset is the present value of the benefits expected from the asset.
Q5 the dividends of companyx are expected to grow at the constant rate of. Models for valuing preferred and common stock are presented. A cyclical company s sales and earnings are heavily influenced by aggregate business activity. Dec 16, 2011 part one accounting and finance fundamentals chapter 1 the role and functions of accounting and finance chapter 2 understanding financial statements chapter 3 financial performance metrics chapter 4 the impact of income taxes on financial analysis part two financial planning and control chapter 5 shortterm financial management and supply chain finance chapter 6 strategic financial planning. Chapter 14 chapter 14 company analysis and stock valuation. Principles and practice in this chapter, we look at how to value a firm and its equity, given what we now know about investment, financing, and dividend decisions. Models our goal in this chapter is to examine the methods commonly used by. Zero growth in dividends for example, preferred stock s s s s r d. Chapter 6 common stock valuation a fundamental assertion of finance holds that a securitys value is based on the present value of its future cash flows. Chapter 7 stock valuation instructors resources overview this chapter continues on the valuation process introduced in chapter 6 for bonds.
The valuation of a large and mature company, with a long financial history, will usually be much more. Chapter 14 company analysis and stock valuation powerpoint ppt. Chapter 14company analysis and stock valuation student. The value of any investment depends on the present value of its cash flows. However fundamental analyst needs to be equipped with certain financial and statistical skills in order to perform it. Chapter 08 stock valuation free cash flow stocks free.
Fundamental analysis, especially company analysis is. Lg 1 explain the role that a companys future plays in the stock valuation process and develop a forecast of a stocks expected cash flow. Given the income and cash flow effects of inventory valuation methods, it is often difficult to. The valuation analysis is made for the purpose of evaluating the existing or proposed property as security for a longterm hudinsured mortgage. Price and enterprise value multiples 107 solutions 107 chapter 7 private company valuation 1 solutions 1 about the cfa program 117.
An example of a direct to equity discounted cash flow analysis is presented below. Investors believe the company will eventually start paying dividends or be sold to another company. Stock of a great company may be overpriced market value is higher than intrinsic value which means its not a good stock to invest in although the company s performance is extremely well. For common stock, the zero growth, constant growth, and. Return concepts essential for evaluating an investment.
The valuation and characteristics of stock chapter 7. Oct 21, 2016 updated guidance and illustrations regarding the valuation of, and disclosures related to, privately held company equity securities issued as compensation this guide also provides expanded and more robust valuation material to reflect advances in the theory and practice of valuation since 2004. You can navigate the site by either going to individual chapters and getting supporting material by chapter, or by going to the supporting material directly. The first and most fundamental approach to valuing a firm is. Fundamental analysis is used primarily to identify securities that are mispriced i. Income versus cashflow reminder to form teams for project 15. Chapter 14 stock market valuation of patent portfolios. Examples of growth companies would include technology.
Fundamental principles of relative valuation 637 chapter 18. The valuation handbook differs significantly from other related books on this topic because the contributors are practitioners, academics, and investment firms that explain how they value companies and other assets. Stock valuation methods are calculations for returns on investments and company growth. Estimating free cash flows to equity the home depot and boeing in this illustration, we estimate the free cash flows to equity for the home depot, the home improvement retail giant, and boeing. The cash flows from a share of stock are the dividends. The current ratio is found by dividing current assets by current liabilities. View notes chapter 14 from fin 640 at antioch university, new england. Gazprom is valued using ddm, fcfe and relative valuation models. They should also complete applicable investment questionnaires or reports. Chapter 14 company analysis and stock valuation powerpoint ppt presentation. Value of common stock present value of future cash flows.
Chapter 3 14 th ed analysis of financial statements answers. The definitive guide to valuation written by a whos who of todays top practitioners. A stock is a good investment if its intrinsic value is above its market price. Chapter 14 company analysis and stock valuation what factors are considered when estimating the earnings multiplier for a firm. Practice questions institute of company secretaries of india. A free powerpoint ppt presentation displayed as a flash slide show on. Specifically, we have three methods under this broad framework. What two specific competitive strategies can a firm use to cope with the competitive environment in its industry. Chapter 9 stocks and their valuation features of common stock determining common stock values efficient markets preferred stock facts about common stock represents ownership. Models of equity valuation basic types of models balance sheet models dividend discount models priceearnings ratios estimating growth rates and opportunities models of equity valuation valuation models use comparables. Good companies are not necessarily good investments. Chapter 9 stocks and their valuation directory viewer. We begin by estimating the free cash flow 1 the mix has to be fixed in book value terms.
This web page is designed to support investment valuation, the second edition. Practice questions institute of company secretaries of. Part one accounting and finance fundamentals chapter 1 the role and functions of accounting and finance chapter 2 understanding financial statements chapter 3 financial performance metrics chapter 4 the impact of income taxes on financial analysis part two financial planning and control chapter 5 shortterm financial management and supply chain finance chapter 6 strategic. Updated guidance and illustrations regarding the valuation of, and disclosures related to, privately held company equity securities issued as compensation this guide also provides expanded and more robust valuation material to reflect advances in the theory and practice of valuation since 2004. Valuation is the analytical process of determining the current or projected worth of an asset or a company. A stock with low systematic risk is considered to be a defensive stock.
Chapter 14 company analysis and stock valuation answers to questions 1. Basic concept of stock valuation model goal is to value a share of common stock that will be held for only one year. How a company is valued an overview of valuation methods and their application 11 11 a brief summary of some of the primary differences between a direct to equity and a debt free discounted cash flow analysis are presented below. Ppt chapter 14 company analysis and stock valuation.
Consequently, the three versions of the fcfe valuation model. Compare the intrinsic value of a stock to its market value. Valuation of business plays a very vital role, therefore a business owner or individual may need to know the value of a business. As perceived risk increases, the required rate of return also increases, causing the stock price to fall. The valuation handbook differs significantly from other related books on this topic because the contributors are practitioners, academics, and investment firms that.
Stocks, stock valuation, and stock market equilibrium. Chapter 3 discounted dividend valuation 77 solutions 77 chapter 4 free cash flow valuation 85 solutions 85 chapter 5 residual income valuation 99 solutions 99 chapter 6 marketbased valuation. Gazprom is a russianbased global vertical integrated energy company with major businesses in geological exploration, production, transportation, storage, processing, and sales of gas. Stock valuation investment management lakehead university company analysis vs stock valuation the common stock of a good company is not necessarily a good investment.
Answer these interactive online questions to see what you. Lg 1 explain the role that a company s future plays in the stock valuation process and develop a forecast of a stock s expected cash flow. Examiners record the extent of the investment analysis if they perform such an analysis in the scope workbook. Company analysis vs stock valuation the common stock of a good company is not necessarily a good investment.
Dec 06, 2011 the definitive guide to valuation written by a whos who of todays top practitioners. Chapter 08 stock valuation free download as powerpoint presentation. Gazprom gas concern was reorganized into a russian joint stock company in the year 1993. Learn vocabulary, terms, and more with flashcards, games, and other study tools. Aswath damodaran investment valuation easyonlinebooks.
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