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Damodaran on Valuation: Security Analysis for Investment and Corporate Finance, Study Guide



Damodaran on Valuation: Security Analysis for Investment and Corporate Finance, Study Guide

Aswath Damodaran

ISBN: 978-0-471-10897-9 October 1994 232 Pages


Damondaran on Valuation will not only convince you of the vitalityof the many valuation models available to you, it will help ensurethat you develop the acumen needed to select the right model forany valuation scenario.

Written by a gifted teacher and respected valuation authority, Damodaran on Valuation offers systematic examination of the threebasic approaches to valuation - discounted cash-flow valuation,relative valuation, and contingent claim valuation - and thevarious models within these broad categories.

Using numerous real-world examples involving both US andInternational firms, the book illuminates the purpose of eachparticular model, its advantages and limitatations, thestep-by-step process involved in putting the model to work, and thekinds of firms to which it is best applied. Among the toolspresented are designed to:

  • Estimate the cost of equity - including the capital asset pricingmodel and arbitrage pricing model
  • Estimate growth rates - with coverage of how to arrive at aweighted average of growth rates by blending three separateapproaches
  • Value equity - focusing on the Gordon Growth Model and thetwo-and three-stage dividend discount model
  • Measure free cash flow to equity - cash flows that are carefullydelineated from the dividends of most firms
  • Value firms - including free cash flow to firm models, which areespecially suited to highly leveraged firms
  • Estimate the value of assets by looking at the pricing ofcomparable assets - with insight into the use and misuse ofprice/earning and price/book value ratios, and underutilizedprice-to-sales ratios
  • Measure the value of assets that share option characteristics -including a comparative look at the classic Black-Scholes andsimpler binomial models

Supported by an optional IBM-compatible disk, which consists ofspreadsheet programs designed to help users apply the modelshighlighted in the book, Damodaran on Valuation providespractitioners involved in securities analysis, portfoliomanagement, M&A, and corporate finance with the knowledge theyneed to value any asset.

Approaches to Valuation.

Estimation of Discount Rates.

Estimation of Cash Flows.

Estimation of Growth Rates.

Dividend-Discount Models.

Free-Cash-Flow-to-Equity Discount Models.

Valuing a Firm--The Free-Cash-Flow-to-Firm Approach.

Special Cases in Valuation.

Price/Earnings Ratios.

Price/Book Value Ratios.

Price/Sales Ratio.

Management Decisions, Corporate Strategy, and Firm Value.

Valuation for Acquisitions and Takeovers.

Option-Pricing Theory.

Applications of Option-Pricing Theory to Valuation.

Overview and Conclusion.



Disk Documentation.