Investment Valuation, University Edition

Auteur

ASWATH DAMODARAN is Professor of Finance at New York University's Leonard N. Stern School of Business. He teaches corporate finance and valuation at leading investment banks. He has been the recipient of numerous awards for outstanding teaching, including the NYU Distinguished Teaching Award, and was named one of the nation's top business school teachers by BusinessWeek. His publications include Damodaran on Valuation, Applied Corporate Finance, The Little Book of Valuation, Investment Philosophies, and The Dark Side of Valuation.

Texte du rabat

AT THE HEART OF EVERY SMART INVESTMENT DECISION IS A THOROUGH AND ACCURATE VALUATION Valuation is the art and science of pricing assets of all kinds, so that you can correctly make buy, sell, or hold decisions. In modern markets, valuation is extremely complex, accounting for many kinds of uncertainty, as well as novel asset structures that bring nuance to the pricing process. This revised Fourth University Edition of Investment Valuation provides expert instruction on how to value almost any type of financial or real asset, including options, start-up firms, cryptocurrencies and other digital assets, real estate, private companies, and more. Written by Aswath Damodaran, an acclaimed professor at New York University's Stern Business School and a noted valuation authority, this reliable resource uses real-world examples and the most current valuation tools to guide you through the theory and application of various valuation models. Along the way, it covers how to:

• **Apply valuation lessons learned from recent events in the global marketplace
• Use real option theory and option pricing models in valuing business and equity
• Price unconventional assets, financial service firms, start-ups, emerging market companies, and many other traditionally valued assets
• Understand probabilistic approaches in valuation, such as scenario analysis, decision trees, and simulations
• Choose the right model for any given asset valuation scenario A comprehensive guide for those who need to know more about the tricky business of valuation, the Fourth University Edition of Investment Valuation-which includes an expanded set of online resources for instructors and students-presents essential information about this critical part of the investment process.

Contenu

Preface xv

Chapter 1 Introduction to Valuation 1

A Philosophical Basis for Valuation 1

Pricing versus Valuation 2

The Bermuda Triangle of Valuation 2

Market Efficiency 6

The Role of Valuation 7

Conclusion 10

Questions and Short Problems 10

Chapter 2 Approaches to Valuation 13

Intrinsic Valuation 13

Pricing or Relative Valuation 21

Contingent Claim Valuation 25

Conclusion 27

Questions and Short Problems 27

Chapter 3 Understanding Financial Statements 29

The Basic Accounting Statements 29

Asset Measurement and Valuation 31

Measuring Financing mix 38

Measuring Earnings and Profitability 44

Measuring Risk 50

Other Issues in Analyzing Financial Statements 56

Conclusion 57

Questions and Short Problems 58

Chapter 4 The Basics of Risk 61

What Is Risk? 61

Equity Risk and Expected Return 62

Alternative Models for Equity Risk 74

A Comparative Analysis of Equity Risk Models 80

Models of Default Risk 81

Conclusion 85

Questions and Short Problems 85

Chapter 5 Option Pricing Theory and Models 91

Basics of Option Pricing 91

Option Pricing Models 94

Extensions of Option Pricing 109

Conclusion 110

Questions and Short Problems 111

Chapter 6 Market Efficiency-Definition, Tests, and Evidence 113

Market Efficiency and Investment Valuation 113

What Is an Efficient Market? 114

Testing Market Efficiency 118

Cardinal Sins in Testing Market Efficiency 123

Some Lesser Sins That Can Be a Problem 124

Evidence on Market Efficiency 125

Time Series Properties of Price Changes 125

Market Reaction to Information Events 133

Market Anomalies 137

Evidence on Insiders and Investment Professionals 146

Conclusion 152

Questions and Short Problems 153

Chapter 7 Riskless Rates and Risk Premiums 157

The Risk-Free Rate 157

Equity Risk Premium 162

Default Spreads on Bonds 182

Conclusion 185

Questions and Short Problems 186

Chapter 8 Estimating Risk Parameters and Costs of Financing 189

The Cost of Equity and Capital 189

Cost of Equity 190

From Cost of Equity to Cost of Capital 221

Best Practices at Firms 233

Conclusion 234

Questions and Short Problems 234

Chapter 9 Measuring Earnings 241

The Lead-in: From Accounting Data to Financial Information 241

Adjusting Earnings 243

Measuring Earnings Power: Clean Up and Time Differences 256

Conclusion 266

Questions and Short Problems 267

Chapter 10 From Earnings To Cash Flows 269

The Tax Effect 269

Reinvestment Needs 279

Conclusion 291

Questions and Short Problems 292

Chapter 11 Estimating Growth 295

The Importance of Growth 295

Historical Growth 296

Outsourcing Growth 307

Fundamental Determinants of Growth 311

Top-Down Growth: From Revenue Growth to Free Cash Flows 324

Qualitative Aspects of Growth 336

Conclusion 337

Questions and Short Problems 338

Chapter 12 Closure in Valuation: Estimating Terminal Value 341

Closure in Valuation 341

The Survival Issue 357

Closing Thoughts on Terminal Value 360

Conclusion 361

Questions and Short Problems 361

Chapter 13 Narrative and Numbers - Story to Value 363

Valuation as a Bridge 363

The Importance of Storytelling 364

The Dangers in Storytelling 366

From Story to Numbers: The Process 368

Narrative and Numbers Across the Life Cycle 380

Story Resets, Changes, and Breaks 382

Conclusion 384

Questions and Short Problems 385

Chapter 14 Equity Intrinsic Value Models 387

Equity Valuation 387

The Dividend Discount Model 388

The Augmented Dividend Discount Model 404

Potential Dividend or FCFE Models 408

FCFE Valuation Versus Dividend Discount Model Valuation 428

Conclusion 430

Questions and Short Problems 431

Chapter 15 Firm Valuation: Cost of Capital and Adjusted Present Value Approaches 437

Free Cash Flow to the Firm 437

Firm Valuation: The Cost of Capital Approach 440

Firm Valuation: The Adjusted Present Value Approach 453

Firm Valuation: Sum of the Parts 458

Effect of Leverage on Firm Value 468

Conclusion 477

Questions and Short Problems 477

Chapter 16 Estimating Equity Value per Share 481

Value of Nonoperating Assets 481

Firm Value and Equity Value 500

Stock-based Compensation 501

Value Per Share When Voting Rights Vary 510

Conclusion 512

Questions and Short Problems 512

Chapter 17 Fundamental Principles of Relative Valuation 515

Use of Relative Valuation 515

Standardized Values and Multiples 516

Four Basic Steps to Using Multiples 518

Reconciling Relative and Discounted Cash Flow Valuations 530

Conclusion 530

Questions and Short Problems 531

Chapter 18 Earnings Multiples 533

Price-Earnings Ratio 533

The PEG Ratio 555

Other Variants on the PE Ratio 565

Enterprise Value to EBITDA Multiple 569

Conclusion 577

Questions and Short Problems 578

Chapter 19 Book Value Multiples 581

Price-to-Book Equity 581

Value-to-Book Ratios 603

Tobin'S Q: Market Value/Replacement Cost 608

Conclusion 610

Questions and Short Problems 610

Chapter 20 Revenue Multiples and Sector-Specific Multiples 613

Revenue Multiples 613

Sector-Specific Multiples 644

Conclusion 653

Questions and Short Problems 653

Chapter 21 Valuing Financial Service Firms 657

Categories of Financial Service Firms 657

What Is Unique About Financial Service Firms? 658

General Framework fo…