How I Value a Company – U.S. Edition

Is there a ‘scientific’ method to calculate the ‘value’ of a share of common stock? Well, the method itself is rather a scientific-looking art than hard science, and the result is rather an assumption-driven, subjective and noisy estimate or opinion than some objective ‘value’, so let’s say that at least there is structured way to approach this problem. In this course, we look at the discounted cash flow (DCF) approach to company valuation. The essence of this method is that the value of a company is the present value of the free cash flows that it generates, discounted to the present at an appropriate discount rate. Of course, this is no Holy Grail – both the underlying theory and its practical implementation are loaded with tons of assumptions. However, it is widely used in the finance profession, and it also helps build formal economic intuition about factors influencing stock prices.

One problem with the DCF approach is that concepts which might look straightforward in theory or in the context of simplified examples could be very far from being straightforward in real-life situations. This might be true for even the most basic concepts such as free cash flow or debt, as they might not be that easy to define and work with in a real-life setting. This course is focused on bridging this gap. It starts with establishing the theoretical foundations in a rigorous manner, and then takes a hands-on approach by discussing the implementation and many of the complexities that are encountered in the practical applications. The course also walks you through a detailed spreadsheet financial model. The model is aimed at the valuation of one share of a company using the discounted cash flow approach. Note that the downloadable spreadsheet file only becomes available 15 days after your enrollment, and only if no refunds are requested.

Please note that this course discusses concepts in a U.S. setting. You can separately purchase a European Addendum to this course which discusses many of the topics covered in this course in a European setting.

Key topics covered include the following:

·      Expected returns, cost of capital, free cash flow

·      Perfect capital markets

·      Corporate income taxes and investor-level taxes

·      Surplus cash and financial investments

·      Non-consolidated associates and nonoperating assets

·      Capital structure and free cash flow in practice

·      Cash flow statement

·      Leases

·      Receivables financing arrangements

·      Supply chain finance

·      Pension and OPEB plans

·      AROs and environmental obligations

·      Debt and equity investments

·      Stock-based compensation arrangements

·      Contingent consideration

·      Loss contingencies

·      LIFO inventories

·      Derivatives

·      Capitalized interest

·      Income taxes

·      Financial modelling in practice

Total gross duration of the videos: almost 15 hours

Product access period: 6 months

Note that the downloadable spreadsheet file only becomes available 15 days after your enrollment, and only if no refunds are requested.

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