Part 3:  Valuing Securities

Chapter 14
Efficient markets—general principles of security valuation

Efficient markets principle 1:  Competitive markets have a
            single price for a single good
Efficient markets principle 2:  Bundles are priced additively
Additivity is not always instantaneous: 
            The case of Palm and 3Com
Efficient markets principle 3:  Cheap information is worthless
Efficient markets principle 4:  Transaction costs are important

PPT for Chapter 14

Chapter 15
Bond valuation

Computing the yield to maturity (YTM) of a bond
U.S. Treasury bills
U.S. Treasury bonds and notes
A corporate bond example:  Giant Industries
Callable bonds
Preferred stock
Deriving the yield curve from zero-coupon bonds

Excel functions:  IRR, XIRR, Rate, Yield

PPT for Chapter 15

Chapter 16
Valuing stocks

Valuation method 1:  The current price of a stock is the
            correct price (efficient markets approach)
Valuation method 2:  The price of a share is the discounted
            value of the future anticipated free cash flows
Valuation method 3:  The price of a share is the present
            value of its future anticipated equity cash flows
            discounted at the cost of equity
Valuation method 4:  Comparative valuation—using
            multiples to value shares
Computing Target’s WACC, the SML approach
Computing Target’s cost of equity with the Gordon model

 

NOTE:  I’ve posted some other PPTs relating to valuation with multiples, an overview of valuation, EVA, and brand valuation.  Use as you like but remember to give credit!

PPT for Chapter 16

Multiples PPT

Valuation overview

Brand valuation

EVA valuation

 

Making intelligent revenue projections