Anno accademico 2019/2020 - 1° anno

SECS-P/07 - 9 CFU - 2° semestre

**Kowledge **

The aim of the course is to provide students with both the conceptual framework of business valuation issues and the practical skills required in the job-market about investment decisions and consulting services. During the course the commonly used approaches are critically analyzed, particularly with respect to Discounted Cash Flow (DCF) and Relative valuations. At the end of the course students will acquire theoretical instruments to critically understand, interpret and apply modern techniques of business valuation and the relationship with financial markets’ behavior.

**Applying Kowledge **

The course has a very strong operative focus and students will learn how to prepare rigorous corporate valuation projects, compliant to international standards.

During the course, student will learn-by-doing:

- how to interpret and use financial information from corporate annual reports;
- how to prepare cash flows projection, making reliable assumption about future estimates;
- how to assess corporate risk profile and its relationship with discount rates used in the analysis;
- how to measure and use stock market multiples;
- how to prepare consistent database and address estimation concerns.

At the end of the course, students will be able to apply both Discounted Cash Flow and Relative analyses, identifying the most appropriate approaches according to the final aim of the valuation.

In Class Lessons.

English. Financial Statement. Accounting Rules. Fundamentals of Corporate Finance. Present Value. Statistical Distribution.

Compulsory.

The valuation philosophy; Subjective Biases; Fundamentals: rates, returns, growth; Rates; Valuation approaches: intrinsic, relative and contingent; Business valuation in professional applications; Leasing; Project financing. Case studies.

Text1: A. Damodaran, “Investment Valuation: Tools and Techniques for Determining the Value of Any Asset, 3rd ed., Wiley (University edition);

Text 2: Lecture Notes

Argomenti | Riferimenti testi | |

1 | Introduction to Valuation | Text 1. Ch. 1 |

2 | Approaches to Valuation: Intrinsic and Relative Valuation | Text 1. Ch. 2 |

3 | Understanding Financial Statements | Text 1. Ch. 3 |

4 | Basics of Intrinsic Valuation. Discounted Cash Flows Valuation. | Text 2 |

5 | Dividends and Free Cash Flows. | Text 2 |

6 | Estimating Discount Rates. Cost of Equity. CAPM. | Text 2 |

7 | Risk-Free Rates and Default Spread. | Text 1. Ch. 7 |

8 | Historical Equity Risk Premium | Text 1. Ch. 7 |

9 | Implied Equity Risk Premium | Text 1. Ch. 7 |

10 | Country Risk Premium | Text 1. Ch. 7 |

11 | Historical Market Beta | Text 1. Ch. 8 |

12 | Bottom-Up Beta | Text 1. Ch. 8 |

13 | Cost of Debt. | Text 1. Ch. 8 |

14 | Market Value of Equity. Market Value of Debt. WACC. | Text 1. Ch. 8 |

15 | Estimating Cash Flows. Adjusting Earnings. | Text 1. Ch. 9 |

16 | Estimating Cash Flows. Reinvestment Needs. | Text 1. Ch. 10 |

17 | Estimating Growth. Historical Growth Rates. | Text 1. Ch. 11 |

18 | Estimating Growth. Fundamental Growth Rates. | Text 1. Ch. 11 |

19 | Closure in Valuation. Estimating High-Growth Period and Growth Pattern. | Text 1. Ch. 12 |

20 | Closure in Valuation. Estimating Terminal Value. Stable Growth Rate. | Text 1. Ch. 12 |

21 | Estimating Equity Value per Share. The Value of Cash, Cross Holdings, Other Assets. | Text 1. Ch. 16 |

22 | Valuing Employee Options. | Text 1. Ch. 16 |

23 | Dividends Discount Model. | Text 1. Ch. 13 |

24 | Free Cash Flows to Equity Discount Model. | Text 1. Ch. 14 |

25 | Free Cash Flows to the Firm Model. | Text 1. Ch. 15 |

26 | Basics of Relative Valuation. Multiples. | Text 1. Ch. 17 |

27 | Equity Side and Asset Side Multiples. | Text 1. Ch. 18,19 |

28 | Analyzing Multiples | Text 1. Ch. 18,19 |

29 | Finding Comparables. Market regressions. | Text 2 |

30 | Valuing Private Firms | Text 1. Ch. 24 |

Grades will be assigned on the basis of the results of one project, a written and an oral exam.

Valuation approaches; terminal value; private company valuation; total beta; DCF valuation; relative valuation; price vs value.