NBA 6560 - Valuation Principles

Spring. 1.5 credits.

H. Kim.

This course is about valuation-the valuation of stocks, companies, parts of companies, and real assets. Three methods of valuation are introduced: intrinsic valuation, relative valuation by multiples using comparables, and contingent claims valuation, based on a real options approach. The rest of the course will be dedicated to understanding each of these methods in greater detail and more importantly, applying them to the valuation of actual companies. This will involve understanding in detail discounted cash-flow models and the many inputs required to build them; dividend discount models; the determination and use of relative-value multiples such as price/earnings and price/book value; and finally, how to apply option theory to specific problems in valuation. The course includes a special session on valuation approaches and challenges specific to venture capital and private-equity investing. This will include a discussion of topics such as required internal rates of return (IRRs), the effects of leverage on valuation, and issues relating to the valuation of high-growth startups.