Equity valuations

Question 1

What is the goal of valuation and explain the difference between price and value

Answer 1

Question 2

Assumptions of valuations: mispricing and what is the GS paradox?

Answer 2

Question 3

Explain the assumption of convergence

Answer 3

Question 4

Explain going concern and liquidation value (immediate vs orderly)

Answer 4

Question 5

Explain what intrinsic, fair and market value is?

Answer 5

Question 6

What are the applications of valuations?

Answer 6

Question 7

What are the steps in the valuation process?

Answer 7

Question 8

What are the three aspects in understanding a business?

Answer 8

Question 9

Explain the difference between relative and absolute valuation models?

Answer 9

Question 10

What is a sum of the parts valuation?

Answer 10

Question 11

What is a conglomerate discount and why may it be applied?

Answer 11

Question 12

Explain the valuation approach and steps

Answer 12

Question 13

What are the properties of dividends as a cashflow?

Question 14

When is a DDM suitable?

Answer 14

Question 15

Explain Free cash flow and residual income and when each are appropriate?

Answer 15

Question 16

Explain the single and multi-period DDM?

Answer 16

Question 17

What is the general form of a DDM and the two usual approaches?

Answer 17

Question 18

What does the gordon growth model assume, what should r and g reflect and what companies is it most suitable for?

Answer 18

Question 19

How to solve for the implied growth rate?

Answer 19

Question 20

Explain the PVGO method?

Answer 20

Question 21

What is the equation for justified P/E ratio?

Answer 21

Question 22

Preferred stock valuation

Answer 22

Question 23

What are the three stages of growth and their properties?

Answer 23

Question 24

What are the two methods of estimating g for the terminal value?

Answer 24

Question 25

What is the H-model and equation?

Answer 25

Question 26

When should FCF be used and what is the formula for FCFF and FCFE?

Answer 26

Question 27

When would FCFE and FCFF be preferred?

Answer 27

Question 28

How to get FCFE and FCFF from net income?

Answer 28

Question 29

How are dividends and interest treated under GAAP and IFRS?

Answer 29

Question 30

How to get FCFE and FCFF from EBIT and EBITDA

Answer 30

Question 31

forecast FCF when can a constant growth rate be assumed?

Answer 31

Question 32

What are the differences between FCF and dividends?

Answer 32

Question 33

What can be EBITDA and NI be used as proxies for?

Answer 33

Question 34

How to adjust FCFE, FCFF and NI for preferred share dividends?

Answer 34

Question 35

What are the GGM and multiples based FCFE and FCFF models?

Answer 35

Question 36

Explain the three stage model?

Answer 36

Question 37

Terminal value under GGM and multiples based?

Answer 37

Question 38

Comparables vs forecasted fundamentals?

Answer 38

Question 39

What is the forward and trailing justified multiple?

Answer 39

Question 40

What is the rational and drawbacks of the P/E ratio?

Answer 40

Question 41

What are the alternative definitions of P/E and what other things must be considered?

Answer 41

Question 42

How does potential dilution and transitory company specific-components impact P/E

Answer 42

Question 43

How do transitory business cycle components influence P/E

Answer 43

Question 44

How to assess P/E of comparable companies?

Answer 44

Question 45

What is the PEG ratio and how to intepret?

Answer 45

Question 46

What are the properties of Index P/Es and what is the fed model and how to intepret?

Answer 46

Question 47

What is the Yardeni model?

Answer 47

Question 48

Justified forward P/E with inflation, pass through and real required rate of return?

Answer 48

Question 49

What is the key conditions of TV's and what are the two methods of calculating?

Answer 49

Question 50

What are the rationales behind using P/B ratio?

Answer 50

Also for companies not expected to continue on going concern

Question 51

What are the drawbacks of P/B?

Answer 51

Question 52

How is BV determined and what adj might need to be made?

Answer 52

Question 53

Whats is the justified P/B ratio and what must consider when looking at comparables?

Answer 53

Question 54

What are the rationales and drawbacks of the P/S ratio?

Answer 54

Question 55

relationship between P/E and P/S?

Answer 55

Question 56

P/S written as a function of net profit margin, g, r and RR? (Justified P/S ratio) How to tell if over/under valued?

Answer 56

Question 57

Rationales and drawbacks of P/CF?

Answer 57

Question 58

Alternatives of determining cash flow?

Answer 58

Question 59

Forecasted fundamentals P/CF and the justified P/CF

Answer 59

Question 60

Comparables method for P/CF

Answer 60

Question 61

Rationale and drawback for D/P and P/D?

Answer 61

Question 62

Valuation using fundamentals and comparables

Answer 62

Question 63

EV/EBITDA, rationale, drawbacks and determining EV and EBITDA

Answer 63

Question 64

Justified EV/EBITDA?

Answer 64

Question 65

What are the other EV multiples ?

Answer 65

Question 66

What are the three momentum valuation indicators?

Answer 66

Question 67

RI from net income

Answer 67

Question 68

RI from NOPAT

Answer 68

Question 69

What will shares sell at when RI> or <0 and what is EVA?

Answer 69

Question 70

What is market value added?

Answer 70

Question 71

What are the four uses of RI models?

Answer 71

Question 72

V0 using RI

Answer 72

Question 73

DDM with RI

Answer 73

Question 74

What are the fundamental determinants

Answer 74

Question 75

What is the single stage RI model and what are the drawbacks

Answer 75

Drawback = assumes (ROE - r) > 0 persists * more likely LT - ROE ~ r and RI = 0

Question 76

What is the multi-stage RI model and the assumptions about RI

Answer 76

Question 77

What are the strengths and weaknesses of RI models?

Answer 77

Question 78

When are RI models most and least appropriate?

Answer 78

Question 79

What is the clean surplus relationship?

Answer 79

Question 80

How can the clean surplus relationship be violated?

Answer 80

Question 81

Explain the accounting issues with RI around BS adjustments for FV, Intangible assets, Nonrecurring items, other aggressive acct practices and international considerations?

Answer 81

Question 82

Describe the comany specific factors of lifecycle stage, size and overlap of shareholders and management?

Question 83

Describe the company specific factors of quality of management, quality of financial information and tax concerns?

Question 84

What are the stock specific factors?

Answer 84

Question 85

What are the transaction related uses of valuations?

Answer 85

Question 86

What are the compliance and litigation related uses?

Answer 86

Question 87

What defines fair market value?

Answer 87

Question 88

What defines fair value and market value?

Answer 88

Question 89

What defines intrinsic and investment value?

Answer 89

Question 90

What are the three valuation approaches?

Answer 90

Question 91

What are the problems with earnings and hence why they need normalisation?

Question 92

What are the issues with CF estimation?

Answer 92

Question 93

Income approach: how to assess discount rate?

Answer 93

Question 94

Explain the FCF and capitalized CF method?

Answer 94

Question 95

Explain the excess earnings method?

Answer 95

F) Value intangible assets - a EEM = WC + FA + Intangibles

Question 96

What are market based methods the reasons its used the challenges and the key multiple?

Answer 96

Question 97

Explain the guideline public company method?

Answer 97

Question 98

Explain the guideline transactions method?

Answer 98

Question 99

Explain the prior transactions method?

Answer 99

Question 100

What is the asset-based approach?

Answer 100

Question 101

What are control premiums and discounts and formula for DLOC?

Answer 101

Question 102

When is a DLOC used and what is a DLOM?

Answer 102

Question 103

What are the international valuation standards?

Answer 103

Question 104

What is Tobins Q

Answer 104

Question 105

How can g be expressed in terms of MV, BV, ROE and r

Answer 105