Financial Valuation of companies. Financial Valuation of companies. Objectives of the course: Unterstand the commonly used techniques in valuation of companies Be able to estimate a spread of values of a company Pr Dr Dominique Thévenin Associate Professor Grenoble Ecole de Management
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Financial Valuation of
Grenoble Ecole de Management
2% (2010 €)3% ( pastaverage)
1-2% (5-15 years)0% - 4 -6%
1% € 2007-2010,0,25% yen, $, 2010
Idea: valuate assets that accounting systems are not able to do, but generate profits.
Untangible assets, know how, human ressources,…
These additionnal value = Goodwill.
But methodologies suggest hazardous formulas:
No cash, no discount, no risk and no expectations!
The Goodwill valuation approach has no backgroud
But Goodwill exists : ex post, GW = Price of a firm – Book Value…
Ev commonly means market value of assets = market cap + debt
P:S, P:EBIT are often computed on market cap and not Ev . Please pay out
Value of equities = value of assets – value of debt.
Assets = sum of investment projects
Assets value = present value of future economic cash flows, discounted @ the cost of capital.
Value of equities = present value of the future cash flows to shareholders
equities value = (economic cash flow – cash flow to bondholders) discounted @ the cost of equities
Where beta = sensitivity of stock / market = cov (stock, market)/market variance
W = value of the call
P0 = price of underlying asset
Px = Stike price
t = maturity
rf = risk free interest rate
Sigma = volatility of the asset
N(.) = cumulative normal law