Damodaran on Valuation_ Security Analysis for Investment and Corporate Finance ( PDFDrive )
pragmatic. Multiples such as price to earningsor price to bookvalueoftencannotevenbe computedforadistressed firm. Analysts there ...
valuationtothevaluationsofotherdistressedcompanies.In the second, we use healthy companies as comparable companies,butfindawayto ...
and debtattheend ofthemost recentfinancial year.Our objectivewastoarriveatasampleoftelecomfirmsthathave a significant likelihood ...
at which firms in different ratings classes trade to get a measureofthediscount(ifany)thatisbeingappliedbythe marketforthedegree ...
afirmvaluethatwasaweightedestimateofagoingconcern value and a distresssale value.For a distressed firmin a sectorwheretheaverage ...
24 trade,wecanestimateanexpectedenterprisevalueinyear 5. Wecanestimatethepresentvalueofthisestimatedvalueby discounting back at ...
Inconventionalvaluation,wesubtractthemarketvalueofthe debtfromfirmvaluetoarriveatequityvalue.Whenvaluing distressedfirms,wehavet ...
negotiationsareprivate(betweenthedistressedfirm and the lenders). Weshouldupdatetheestimatedmarketvalueofdebt frequently,sincet ...
with substantial debt and a significant potential for bankruptcy,theoptionvalueofequitymaybeinexcessofthe discounted cash flow v ...
ILLUSTRATION 17.8: Valuing Equity as an Option Assumethatwearevaluingtheequityinafirmwhoseassets arecurrentlyvaluedat$100million ...
Sincethecall valuerepresentsthevalueof equityand the firm value is $100 million, the estimated value of the outstanding debt can ...
underlyingasset mayincrease abovethestrikepricein the remaining lifetime of the option, equity commands value becauseofthetimepr ...
Increasing Risk Can Increase Equity Value In traditional discounted cash flow valuation, higher risk almostalwaystranslatesintol ...
FIGURE17.3EquityValueandStandardDeviationinFirm Value Probability of Default and Default Spreads Oneofthemoreinterestingpiecesof ...
In addition, the interest rate from the debt allows us to estimate the appropriate default spread to charge on bonds. Youcanseet ...
Estimating the Value of Equity as an Option The examples we have used thus far to illustrate the application ofoptionpricingto v ...
4.Thevalueofthefirmandthevarianceinthatvaluecanbe estimated. Each ofthese assumptions ismade for a reason. First, by restricting ...
Since most firms do not fall into the neat framework developedhere(suchashavingonlyonezerocouponbond outstanding),wehavetomakeso ...
Implicitly, we are assuming that a potential buyer, in the event of liquidation, will pay this value. Wecanusethefourthapproachf ...
adeeplytroubledsteelcompanycanbeestimatedusingthe average variance in firm value of all traded steel companies. Maturity of the ...
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