1 / 32

Corporate Finance: Spring 2014

Corporate Finance: Spring 2014. Aswath Damodaran. Ponderous Thoughts, or maybe not. There are few facts and lots of opinions. Even the givens (cash & risk free rate) are not With accounting and market numbers, all bets are off. The real world is a messy place.

jin-booker
Download Presentation

Corporate Finance: Spring 2014

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Corporate Finance: Spring 2014 Aswath Damodaran

  2. Ponderous Thoughts, or maybe not • There are few facts and lots of opinions. • Even the givens (cash & risk free rate) are not • With accounting and market numbers, all bets are off. • The real world is a messy place. • Money making firms can become money losers • Companies can be restructured/ given facelifts • Models don’t compute values and optimal paths. You do. • Change is the only constant.

  3. The Breakdown in the Classical Objective Function STOCKHOLDERS Managers put their interests above stockholders Have little control over managers Significant Social Costs Lend Money Managers BONDHOLDERS SOCIETY Bondholders can get ripped off Some costs cannot be traced to firm Delay bad news or provide misleading information Markets make mistakes and can over react FINANCIAL MARKETS

  4. I. Where does the power lie?

  5. II. Who is your marginal investor?From Spring 2013

  6. III. Risk Profiles and Costs of Equity

  7. Beta: The Standard Approach

  8. Regression Estimation Approaches Typical reasons My company is unique. I cannot find comparable firms. My company is in only one line of business My bottom-up beta is too different from my regression beta

  9. Beta Distribution

  10. Jensen’s Alpha Distribution

  11. R Squared

  12. Cost of Capital

  13. Distribution of Current Market Value Debt Ratios

  14. IV. The Quality of Investments: The Firm View

  15. Return Spreads

  16. VI. The Optimal Financing Mix

  17. Under versus Over Levered Firms

  18. VIII. The Right Kind of Financing

  19. IX. Measuring Potential Dividends

  20. Dividends versus FCFE

  21. X. Valuation: Match up cashflows and discount rates…

  22. Getting to equity value per share

  23. Value versus Price

  24. Ways of changing value…

  25. Aswath Damodaran

  26. Aswath Damodaran

  27. So, how do you explain the price? Its all relative..

  28. Most undervalued stocks!!

  29. The Triple Whammy: Underlevered, Cash Build-up and Under valued?

  30. First Principles

  31. Objectives of this class • If you get the big picture, the details will come (sooner or later) • Tools are useful but only in the larger context of answering bigger questions. • Corporate finance is not so bad !!!

  32. And don’t forget your CFEs… 1. This course was mentally challenging/intellectually stimulating. 1 2 3 4 5 6 7 No-brainer! Brilliant insights! 2. This course was demanding of my time. 1 2 3 4 5 6 7 What work? Haven’t slept all semester. 3. This course provided me with tools and information that I will find useful in the future. 1 2 3 4 5 6 7 Only in prison Completely relevant 4. Overall evaluation of the course 1 2 3 4 5 6 7 Horrible! ( I want my money back) Stupendous! 5. The instructor was organized and well prepared for class. 1 2 3 4 5 6 7 Had trouble finding classroom Scarily efficient! 6. The instructor communicated his/her ideas and material well. 1 2 3 4 5 6 7 Garbled gobbledygook! Should have own TV show 7. The instructor was enthusiastic about his/her subject matter. 1 2 3 4 5 6 7 Dead man talking! I am a convert 8. Overall evaluation of the instructor 2 3 4 5 6 7 Dog! Star!

More Related