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Mastering Company Valuation Methods: Market Cap, Dividends, Book Value

Learn how to estimate a company's value using market cap, future dividends, and book value. Discover the intrinsic value of a future $1 and how information affects price, including CEO effectiveness and global factors.

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Mastering Company Valuation Methods: Market Cap, Dividends, Book Value

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  1. Objectives: • Understand multiple methods of estimating a company’s value: • Market cap • Future dividends • Book value

  2. Notional Company • Print $1/year each year, forever • What is this company worth?

  3. What is Current Value of a Future $1

  4. Intrinsic Value • “future income generated by the asset, and discounting it to the present value.” • sum(dividend*gamma^i) • = dividend * 1/(1-gamma)

  5. Why/How Does Information Affect Price? • Informs traders about the company’s capacity to make money in the future. • Examples • CEO effectiveness. • Cost of raw materials.

  6. Local and Global Affects

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