Damodaran on Valuation_ Security Analysis for Investment and Corporate Finance ( PDFDrive )
Thereisaroleforvaluationateverystageofafirm’s life cycle.Forsmallprivatebusinessesthinkingaboutexpanding, valuationplaysakeyrole ...
ownerdies,andfordivorceproceedingswhencouplesbreak up. Whilethe principlesof valuationmaynot be different whenvaluingabusinessfo ...
lowerthanmarketequity.Thisthenpushesupthevaluefor thesefirms.Whilethismaymaketheaskingpriceattractive tothesellersofthesefirms,v ...
PART ONE Discounted Cash Flow Valuation Indiscountedcashflowvaluation,webeginwiththepremise thatthevalueofanassetisthepresentval ...
alsoconsiderhowbesttoestimatetheterminalvalueatthe end of the estimation phase. InChapter5,welookatequityvaluationmodels,beginni ...
CHAPTER 2 Estimating Discount Rates Indiscountedcash flowvaluations, thediscountratesused shouldreflecttheriskinessofthecashflow ...
speeding ticket, or worse still, getting into an accident. Webster’sdictionary,infact,definesriskas“exposingtoloss or damage.” T ...
“expectedreturn.”Wearguethatriskinaninvestmenthasto beperceivedthroughtheeyesofinvestorsinthefirm.Since publiclytradedfirmshavet ...
thesediverseinvestorswillacceptastherightcostofequity in valuing the company. Estimation Approaches Therearethreedifferentwaysin ...
tooneorafewinvestmentsandriskthataffectsamuchwider crosssectionofinvestments.Wearguethatinamarketwhere themarginalinvestoriswell ...
Weshouldnotethattheexpectedreturnsandvariancesthat we see in practice arealmost always estimatedusing past returns ratherthanexp ...
theeffects,thoughcyclicalfirms(suchasautomobiles,steel, andhousing)mayfeelitmore.Wecategorizetheseasmarket risk. Finally,therear ...
diversified portfolio is a much smaller percentage of that portfoliothanwouldbethecaseifyouwerenotdiversified. Thus,anyactiontha ...
pension fund—for manylarger and even midsize publicly traded companies. 1 Institutional investors tendto be diversified, though ...
ormarketrisk.Inthissection,wediscussthedifferentmodels formeasuringmarketriskandwhytheydiffer.Webeginwith whatstillisthedefaultm ...
firm-specificrisk.Statistically,wecanmeasuretheriskadded byanassettothemarketportfoliobyitscovariancewiththat portfolio. The cov ...
TheCAPMisaremarkablemodelinsofarasitcapturesan asset’sexposuretoallmarketriskinonenumber—theasset’s beta—but it does so at the c ...
unidentifiedstatisticalfactorswithspecificeconomicfactors andtheresultantmodelshouldhaveaneconomicbasiswhile stillretainingmucho ...
The costs of going from the APM to a macroeconomic multifactormodelcanbetraceddirectlytotheerrorsthatcan bemadeinidentifyingthef ...
Whichofthesemodelsworksthebest?Isbetaagoodproxy for risk and is it correlated with expected returns? The answerstothesequestions ...
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