讲企业估值与增值.pptVIP

Lecture 4 Firm Valuation and Value Enhancement Reading Materials 1. Damodaran, “Corporate Finance Theory and Practice” Chapter 24,25,27 2. Tirole, “The Theory of Corporate Finance” Chapter 1, 10. Analysis Discussion 1.Compare different Valuation approaches 2. Study on the effect of stock option in Chinese firms 3. Analyze relationship between corporate governance and firm value Outline ⅠApproaches to Valuation ⅡValue Enhancement Ⅲ Corporate Governance and Firm Value ⅠApproaches to Valuation Discounted Cash Flow Relative Valuation Option Pricing Economic Value Added Discounted Cash Flow Valuation: Basis for Approach DCF is the most popular valuation method. (Irving Fisher,1906, 1930) where, n = Life of the asset CFt = Cash flow in period t r = Discount rate reflecting the riskiness of the estimated cash flows Equity Valuation (Williams,1938) The value of equity is obtained by discounting expected cash flows to equity, i.e., the residual cash flows after meeting all expenses, tax obligations and interest and principal payments, at the cost of equity, i.e., the rate of return required by equity investors in the firm. where, CF to Equityt = Expected Cashflow to Equity in period t ke = Cost of Equity The dividend discount model is a specialized case of equity valuation, and the value of a stock is the present value of expected future dividends. Firm Valuation The value of the firm is obtained by discounting expected cash flows to the firm, i.e., the residual cash flows after meeting all operating expenses and taxes, but prior to debt payments, at the weighted average cost of capital, which is the cost of the different components of financing used by the firm, weighted by their market value proportions. where, CF to Firmt = Expected Cash flow to Firm in period t WACC = Weighted Average Cost of Capital Firm Valuation (Jensen,1986) A publicly traded firm potentially has an infinite life. Depending on the firm’s stage in the growth cy