《007-CORPORATE FINANCE-LECTURE NOTES 05-BUSINESS VALUATION》.pdf

Business Valuation Lecture Notes 05 These slides are partially edited from A. Damodaran withith hihis permiissiion Lecture Notes 05 Corporate Finance/Gómez/NYU 1 Lecture plan  IIntrodductiion to DCFDCF va lluatiion  Issues in DCF valuation:  I. Free Cash FlowsI. Free Cash Flows  II. Discount rate  III. Growth rate  IVIV. T Termiinal Vl Vallue  Relative Valuation by multiples Lecture Notes 05 Corporate Finance/Gómez/NYU 2 Steps in DCF valuation  I Estimate the relevant FREE CASH FLOWS  FIRM FREE CASH FLOWS  EQUITY FREE CASH FLOWS  Cash and Enterprise ValueCash and Enterprise Value  II Asses the project’s risk  COST OF EQUITY (k ) e  COST OF DEBT (COST OF DEBT (kk )) dd  COST OF THE ASSETS (k ) u  Adjustments for Private Firms  III Growth rateIII Growth rate  IV Closure to valuation (Terminal Value) Lecture Notes 05 Corporate Finance/Gómez/NYU 3 Generic DCF Valuation Model DISCOUNTED CASHFLOW VALUATIONDISCOUNTED CASHFLOW VALUATION Expected GrowthExpected Growth Cash flows Firm: Growth in Firm: Pre-debt cash Operating Earnings flow Equity: Growth in Equity: After debt Net Inco