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| Introduction to Valuation | |
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| A Philosophical Basis for Valuation | |
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| Generalities about Valuation | |
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| The Role of Valuation | |
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| Conclusion | |
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| Questions and Short Problems | |
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| Approaches to Valuation | |
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| Discounted Cash Flow Valuation | |
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| Relative Valuation | |
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| Contingent Claim Valuation | |
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| Conclusion | |
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| Questions and Short Problems | |
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| Understanding Financial Statements | |
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| The Basic Accounting Statements | |
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| Asset Measurement and Valuation | |
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| Measuring Financing Mix | |
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| Measuring Earnings and Profitability | |
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| Measuring Risk | |
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| Other Issues in Analyzing Financial Statements | |
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| Conclusion | |
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| Questions and Short Problems | |
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| The Basics of Risk | |
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| What Is Risk? | |
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| Equity Risk and Expected Return | |
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| A Comparative Analysis of Risk and Return Models | |
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| Models of Default Risk | |
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| Conclusion | |
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| Questions and Short Problems | |
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| Option Pricing Theory and Models | |
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| Basics of Option Pricing | |
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| Determinants of Option Value | |
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| Option Pricing Models | |
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| Extensions of Option Pricing | |
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| Conclusion | |
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| Questions and Short Problems | |
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| Market Efficiency--Definition, Tests, and Evidence | |
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| Market Efficiency and Investment Valuation | |
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| What Is an Efficient Market? | |
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| Implications of Market Efficiency | |
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| Necessary Conditions for Market Efficiency | |
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| Propositions about Market Efficiency | |
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| Testing Market Efficiency | |
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| Cardinal Sins in Testing Market Efficiency | |
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| Some Lesser Sins That Can Be a Problem | |
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| Evidence on Market Efficiency | |
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| Time Series Properties of Price Changes | |
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| Market Reaction to Information Events | |
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| Market Anomalies | |
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| Evidence on Insiders and Investment Professionals | |
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| Conclusion | |
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| Questions and Short Problems | |
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| Riskless Rates and Risk Premiums | |
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| The Risk-Free Rate | |
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| Equity Risk Premium | |
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| Default Spreads on Bonds | |
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| Conclusion | |
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| Questions and Short Problems | |
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| Estimating Risk Parameters and Costs of Financing | |
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| The Cost of Equity and Capital | |
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| Cost of Equity | |
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| From Cost of Equity to Cost of Capital | |
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| Best Practices at Firms | |
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| Conclusion | |
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| Questions and Short Problems | |
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| Measuring Earnings | |
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| Accounting versus Financial Balance Sheets | |
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| Adjusting Earnings | |
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| Conclusion | |
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| Questions and Short Problems | |
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| From Earnings to Cash Flows | |
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| The Tax Effect | |
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| Reinvestment Needs | |
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| Conclusion | |
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| Questions and Short Problems | |
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| Estimating Growth | |
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| The Importance of Growth | |
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| Historical Growth | |
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| Analyst Estimates of Growth | |
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| Fundamental Determinants of Growth | |
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| Qualitative Aspects of Growth | |
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| Conclusion | |
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| Questions and Short Problems | |
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| Closure in Valuation: Estimating Terminal Value | |
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| Closure in Valuation | |
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| The Survival Issue | |
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| Closing Thoughts on Terminal Value | |
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| Conclusion | |
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| Questions and Short Problems | |
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| Dividend Discount Models | |
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| The General Model | |
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| Versions of the Model | |
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| Issues in Using the Dividend Discount Model | |
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| Tests of the Dividend Discount Model | |
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| Conclusion | |
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| Questions and Short Problems | |
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| Free Cash Flow to Equity Discount Models | |
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| Measuring What Firms Can Return to Their Stockholders | |
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| FCFE Valuation Models | |
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| FCFE Valuation versus Dividend Discount Model Valuation | |
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| Conclusion | |
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| Questions and Short Problems | |
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| Firm Valuation: Cost of Capital and Adjusted Present Value Approaches | |
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| Free Cash Flow to the Firm | |
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| Firm Valuation: The Cost of Capital Approach | |
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| Firm Valuation: The Adjusted Present Value Approach | |
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| Effect of Leverage on Firm Value | |
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| Adjusted Present Value and Financial Leverage | |
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| Conclusion | |
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| Questions and Short Problems | |
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| Estimating Equity Value per Share | |
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| Value of Nonoperating Assets | |
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| Firm Value and Equity Value | |
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| Management and Employee Options | |
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| Value per Share When Voting Rights Vary | |
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| Conclusion | |
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| Questions and Short Problems | |
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| Fundamental Principles of Relative Valuation | |
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| Use of Relative Valuation | |
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| Standardized Values and Multiples | |
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| Four Basic Steps to Using Multiples | |
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| Reconciling Relative and Discounted Cash Flow Valuations | |
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| Conclusion | |
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| Questions and Short Problems | |
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| Earnings Multiples | |
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| Price-Earnings Ratio | |
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| The PEG Ratio | |
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| Other Variants on the PEG Ratio | |
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| Conclusion | |
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| Questions and Short Problems | |
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| Book Value Multiples | |
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| Price-to-Book Equity | |
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| Applications of Price-Book Value Ratios | |
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| Use in Investment Strategies | |
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| Value-to-Book Ratios | |
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| Tobin's Q: Market Value/Replacement Cost | |
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| Conclusion | |
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| Questions and Short Problems | |
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| Revenue Multiples and Sector-Specific Multiples | |
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| Revenue Multiples | |
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| Sector-Specific Multiples | |
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| Conclusion | |
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| Questions and Short Problems | |
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| Valuing Financial Service Firms | |
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| Categories of Financial Service Firms | |
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| What Is Unique about Financial Service Firms? | |
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| General Framework for Valuation | |
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| Discounted Cash Flow Valuation | |
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| Asset-Based Valuation | |
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| Relative Valuation | |
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| Issues in Valuing Financial Service Firms | |
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| Conclusion | |
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| Questions and Short Problems | |
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| Valuing Firms with Negative Earnings | |
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| Negative Earnings: Consequences and Causes | |
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| Valuing Negative Earnings Firms | |
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| Conclusion | |
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| Questions and Short Problems | |
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| Valuing Young or Start-Up Firms | |
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| Information Constraints | |
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| New Paradigms or Old Principles: A Life Cycle Perspective | |
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| Venture Capital Valuation | |
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| General Framework for Analysis | |
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| Value Drivers | |
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| Estimation Noise | |
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| Implications for Investors | |
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| Implications for Managers | |
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| The Expectations Game | |
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| Conclusion | |
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| Questions and Short Problems | |
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| Valuing Private Firms | |
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| What Makes Private Firms Different? | |
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| Estimating Valuation Inputs at Private Firms | |
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| Valuation Motives and Value Estimates | |
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| Valuing Private Equity | |
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| Conclusion | |
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| Questions and Short Problems | |
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| Acquisitions and Takeovers | |
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| Background on Acquisitions | |
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| Empirical Evidence on the Value Effects of Takeovers | |
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| Steps in an Acquisition | |
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| Takeover Valuation: Biases and Common Errors | |
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| Structuring the Acquisition | |
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| Analyzing Management and Leveraged Buyouts | |
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| Conclusion | |
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| Questions and Short Problems | |
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| Valuing Real Estate | |
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| Real versus Financial Assets | |
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| Discounted Cash Flow Valuation | |
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| Comparable/Relative Valuation | |
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| Valuing Real Estate Businesses | |
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| Conclusion | |
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| Questions and Short Problems | |
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| Valuing Other Assets | |
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| Cash-Flow-Producing Assets | |
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| Non-Cash-Flow-Producing Assets | |
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| Assets with Option Characteristics | |
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| Conclusion | |
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| Questions and Short Problems | |
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| The Option to Delay and Valuation Implications | |
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| The Option to Delay a Project | |
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| Valuing a Patent | |
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| Natural Resource Options | |
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| Other Applications | |
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| Conclusion | |
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| Questions and Short Problems | |
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| The Options to Expand and to Abandon: Valuation Implications | |
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| The Option to Expand | |
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| When Are Expansion Options Valuable? | |
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| Valuing a Firm with the Option to Expand | |
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| Value of Financial Flexibility | |
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| The Option to Abandon | |
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| Reconciling Net Present Value and Real Option Valuations | |
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| Conclusion | |
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| Questions and Short Problems | |
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| Valuing Equity in Distressed Firms | |
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| Equity in Highly Levered Distressed Firms | |
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| Implications of Viewing Equity as an Option | |
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| Estimating the Value of Equity as an Option | |
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| Consequences for Decision Making | |
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| Conclusion | |
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| Questions and Short Problems | |
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| Value Enhancement: A Discounted Cash Flow Valuation Framework | |
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| Value Creating and Value-Neutral Actions | |
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| Ways of Increasing Value | |
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| Value Enhancement Chain | |
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| Closing Thoughts on Value Enhancement | |
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| Conclusion | |
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| Questions and Short Problems | |
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| Value Enhancement: Economic Value Added, Cash Flow Return on Investment, and Other Tools | |
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| Economic Value Added | |
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| Cash Flow Return on Investment | |
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| A Postscript on Value Enhancement | |
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| Conclusion | |
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| Questions and Short Problems | |
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| Valuing Bonds | |
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| Bond Prices and Interest Rates | |
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| Determinants of Interest Rates | |
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| Special Features in Bonds and Pricing Effects | |
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| Conclusion | |
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| Questions and Short Problems | |
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| Valuing Futures and Forward Contracts | |
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| Futures, Forward, and Option Contracts | |
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| Traded Futures Contracts--Institutional Details | |
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| Pricing of Futures Contracts | |
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| Effects of Special Features in Futures Contracts | |
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| Conclusion | |
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| Questions and Short Problems | |
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| Overview and Conclusion | |
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| Choices in Valuation Models | |
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| Which Approach Should You Use? | |
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| Choosing the Right Discounted Cash Flow Model | |
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| Choosing the Right Relative Valuation Model | |
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| When Should You Use the Option Pricing Models? | |
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| Conclusion | |
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| References | |
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| Index | |