Corporate Valuation

Objectives

This course is designed to train the participants in valuing corporate stocks and in assessing the main components of a company´s value. Along the course, students will review alternative valuation models, their usefulness and some practical issues relating to their application.

General characterization

Code

2239

Credits

3.5

Responsible teacher

Maria do Rosário Campos Silva André Gouveia

Hours

Weekly - Available soon

Total - Available soon

Teaching language

English

Prerequisites

Bibliography

- T. Koller, M. Goedhart, and D. Wessels, Valuation: Measuring and Managing the Value of Companies, McKinsey & Company, John Wiley & Sons, 5th ed.
- J. Berk, and P. DeMarzo, Corporate Finance, Pearson, 3rd ed.

Teaching method

The course will have 12 sessions (1h20m each, twice a week). The course will count on the students active participation, both in class and in its preparation. Prior to each session, students will be given the topics to discuss in the next session, the suggested reading material and some simple assignments to prepare and to discuss in the class. During the classes the instructor will explain the topics and will review with the students some ways to solve the assignments, compare the results and the theories, and review the usefulness and assumptions behind each approach.

Each session will end up with wrap up conclusions about the topics discussed. For each main topic, students will be given individual assignments to consolidate what was learnt on class.

Evaluation method

The final grade will be the result of:
-    1 Individual Home Assignment (10%) – The assignment consists in a short exercise related to a main topic discussed in class.
-    Group Work (30%) – The Group Work consists in the valuation of a real company or project (to be defined later by the instructor) and is intended to wrap up the
course’s main topics. Each group will deliver a maximum 5 pages report and the Excel valuation spreadsheet with all the calculations. Each Group will have a maximum of 4 students.
-    Final Written Exam (60%) – the Final Exam is mandatory. Students must obtain a minimum mark of 9/20. The Final Exam is closed book, with the exception of a double side A4 sheet.

Subject matter

Main topics covered in the course:

I. Calculation of cash flows for valuation purposes. Translation of a company´s performance into a stream of cash flows.

II. Estimation of a company´s short and long term performance (capital budgeting), for industrial and financial institutions - namely, what may affect its long term potential for value creation and its growth prospect.

III. Identification of sources of risk. Relate risk to required return. Practical examples of opportunity cost of debt and cost of equity.

IV. Alternative valuation methods: DCF, FTE, EVA, NAV, Multiples, among others.

V. Specific cases of valuation, when there are no direct comparables: e.g. startups, firms in developing countries, private companies (debt not traded, shares not listed).

VI. Valuation of companies with various business units and operating in various geographies nd with various currencies.

Programs

Programs where the course is taught: