Business valuation is a present value concept that involves estimating future cash flows of a business and discounting them at a required rate of return. This course explains how the value of a bond is essentially the present value of all future interest and principal payments. You'll receive a thorough explanation of the Gordon valuation model, which demonstrates that stock price may be expressed as a function of the expected future dividends and a rate of return required by investors. Real estate valuation also involves several rule-of-thumb valuation methods, which are discussed in this course.
Upon successful completion of this course, participants will be able to:
- List the steps involved in business valuation
- Identify the various approaches and methods in determining what a business is worth
- Cite the concepts and computational procedures in valuing securities, bonds, and stocks
- Identify important concepts of the price earnings ratio, beta, and other pragmatic valuation approaches
- Identify approaches to determine the value of an income producing property
Table of Contents
Chapter 1 – Corporate Valuations
Steps in Valuation
Step 1: Analyze Historical Performance
Matching Value Definitions and Valuation Reasons
Fair Market Value
“Going Concern” Value
General Approaches to Business Valuation
Earnings (or Cash Flows)
Performing a General Analysis of the Company Being Valued
Step 2: Forecast Future Performance
Customers and Markets
Products and Services
Employees and Management
Historical and Projected Financial Performance
Step 3: Estimate the Rate of Capitalization Rate
Step 4: Estimate Valuation
1. Adjusted Net Assets Method
2. Gross Revenue Multiplier Method
3. Capitalization of Earnings Method
4. Price-Earnings Ratio Method
5. Dividend Payout (or Dividend Paying Capacity) Method
6. Excess Earnings Return on Assets Method
7. Excess Earnings Return on Sales Method
8. Discounted Cash Flow Method
Abnormal Earnings Approach
Using a Computer to Help
9. Combining Valuation Methods
Step 5: Compute and Interpret Results
Control Premiums and Discounts
Revenue Ruling 59 - 60
Section 1. Purpose
Section 2. Background and Definitions
Section 3. Approach to Valuation
Section 4. Factors to Consider
Section 5. Weight to Be Accorded Various Factors
Section 6. Capitalization Rates
Section 7. Average of Factors
Section 8. Restrictive Agreements
Section 9. Effect on Other Documents
How to Market Valuation Services
Chapter 1 Review Questions
Chapter 2 – Security and Real Estate Valuation
How to Value a Security
How to Value Bonds
How to Value Common Stock
Single Holding Period
Multiple Holding Period
How to Forecast Stock Price — A Pragmatic Approach
What are the Determinants of the Price-Earnings Ratio?
How to Read Beta
What Does It Mean When a Firm's Stock Sells on a High or Low P/E Ratio?
What Other Pragmatic Approaches Exist?
The Price-Sales (P/S) Ratio
The Price-Dividends (P/D) Ratio
The Price-Book (P/B) Ratio
What is the Bottom Line?
How Do You Value an Income Producing Property?
Chapter 2 Review Questions
Review Question Answers and Rationales
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