Julia Sanchez. Damodaran on Valuation, Security Analysis for Investment and Corporate Finance. Aswath Damodaran.
Chapter 1: This chapter describes the process of valuation and enlightens how it ties into corporate finance, the management of portfolios, and the analysis of acquisitions. Since the value of assets differ, estimates to determine the financial and real value are required. The uncertainty of value for assets is common and a great technique to diminish this is by building better models and creating ranges. In corporate finance, valuation is important due to the process of requesting extra capital from investors. Not all investors, such as fundamental analysts and information traders are interested in valuation in portfolio management. …show more content…
Firms also use unhindered and restricted stock which highly affects the value per share. Due to its illiquidity, the value of restricted stock must be lesser than the rest of the stock. Restricted stock can’t be traded until the end of the specific time frame and if the employee leaves the firm, the restricted stock is automatically forfeited. Relative valuation will not be affected as much because the illiquidity reduction of the restricted stock is minor. Chapter 12: This chapter explains the various intangible assets that have reputation of generating cash flows for firms and how discounted cash flow models aid in valuing trademarks and licenses. Brand names are an example of the intangible assets that generate cash flows to the entire firm and are quite challenging to value due to its competitive advantages. Fierce competition exists and employees tend to gravitate to the highest paying firms. Thus, human capital is difficult to value since it can only be “rented” by the firms. An option pricing model will aid in valuing an intangible asset, such as undeveloped patents, that might generate cash flows in the future. Chapter 13: Value of control
Chapter 1: This chapter describes the process of valuation and enlightens how it ties into corporate finance, the management of portfolios, and the analysis of acquisitions. Since the value of assets differ, estimates to determine the financial and real value are required. The uncertainty of value for assets is common and a great technique to diminish this is by building better models and creating ranges. In corporate finance, valuation is important due to the process of requesting extra capital from investors. Not all investors, such as fundamental analysts and information traders are interested in valuation in portfolio management. …show more content…
Firms also use unhindered and restricted stock which highly affects the value per share. Due to its illiquidity, the value of restricted stock must be lesser than the rest of the stock. Restricted stock can’t be traded until the end of the specific time frame and if the employee leaves the firm, the restricted stock is automatically forfeited. Relative valuation will not be affected as much because the illiquidity reduction of the restricted stock is minor. Chapter 12: This chapter explains the various intangible assets that have reputation of generating cash flows for firms and how discounted cash flow models aid in valuing trademarks and licenses. Brand names are an example of the intangible assets that generate cash flows to the entire firm and are quite challenging to value due to its competitive advantages. Fierce competition exists and employees tend to gravitate to the highest paying firms. Thus, human capital is difficult to value since it can only be “rented” by the firms. An option pricing model will aid in valuing an intangible asset, such as undeveloped patents, that might generate cash flows in the future. Chapter 13: Value of control