040569 VK KFK CF: Valuation (E) (2015W)

- Goals, contents of the course:
This course focuses on methods to value firms and/or individual projects. We will cover three alternative approaches to valuation: discounted cashflow valuation, relative valuation and contingent claim (real options) valuation.

- Methods of conveying the content:
We start with an in-depth analysis of the discounted cash flow method and its practical implementation. More specifically we will discuss various versions of discounted cash flow models, including the discounted free cash flow model, discounted capital cash flow model, and adjusted present value model.

We will also discuss how various inputs required by those valuation models can be obtained from historical data. In particular we will discuss how to forecast future cash flows, calculate residual values and derive appropriate discount rates.

The relative valuation approach estimates the value of a firm by looking at the pricing of "comparable" firms relative to a common variable such as earnings, cash flows or book equities. We will discuss pros and cons of this popular valuation method.

The contingent claim valuation approach is a more sophisticated method that tries to quantify the impact of managerial flexibility on firm/project valuation. We will cover applications of the Black-Scholes formula, binomial option pricing model and Monte Carlo simulations to evaluate firms or investment projects that have option characteristics.

- The way of efficiency control: written
- Language: English
- Allowed auxiliary means: Close-book exams, Calculator is allowed in the exams
- Presence control: Attendance is required
- Contribution of partial exams to the final grade:
Midterm: 30%, Final: 45%, Case study: 25%
- The minimum requirements for the positive grade:
More than 50% of the full points