- - teach how to choose methods for asset valuation;
- - explain pros and cons of each method; and
- - apply valuation methods in practice.
- search for appropriate data for company valuation depending on the requirements and goals of the valuation exercise and availability of reliable data
- select an appropriate valuation method, understand and argue why a certain valuation method is (in)appropriate given the circumstances
- apply valuation approaches in a sequence or circular modality
- do a basic financial analysis of a company to estimate the level of its credit risk
- prepare to company price negotiations and apply some basic negotiation techniques
- IntroductionBasic definitions. Valuation applications. Choice of valuation method. Dividend discount model (DDM).
- FCFF & FCFEDefinition and application of Free Cash Flows – FCFF and FCFE. Case.
- MultiplesMultiples method – P/E, EV/EBITDA, P/BV, etc. Case Residual value method. EVA. Venture capital method. Homework on calculating multiples for a Russian company.
- Financial modelling 1Financial modeling/forecasting in Excel. Homework on financial modeling.
- Financial modelling 2Financial modeling/forecasting in Excel. Analysis of homework on financial modeling. Credit/ratio analysis.
- Credit analysisAnalysis of a company’s credit standing with a set of credit ratios applied by commercial banks. The ratios analyzed are: Debt/EBITDA, Equity/Assets, DSCR, Interest Cover, Current Assets/Current Liabilities. The purpose and limitation of each ratio is discussed.
- Bank’s Financial Statement analysisAnalysis of Financial Statements of the bank – main balance sheet and P&L items and how it differs from corporate analysis. Besides, explanation and calculation of the main ratios - Return on equity (ROE), Return on assets (ROA), Net interest margin (NIM), Cost of Risk (COR), Costto-Income ratio (CIR), Capital Adequacy Ratio (CAR).
- Bank’s Financial Model - forecasting & valuationForecasting of the balance sheet and P&L of the bank in Excel. Determination and application of the main valuation methods, applicable to banks – Gordon Growth Model (GGM), Dividend Discount Method (DDM), Excess capital, Return on equity (ROE) / Cost of Equity (COE). Homework on financial modeling.
- Investment ideas screening in banksInternational banks’ screening, based on multiples (P/BV, P/E) and profitability (ROE). Explanation of the main differences for discounts/premiums of the banks globally.
- Home assignments2 home assignments, with equal weight
- home assignment (banking)
- Exam (Banking)
- Interim assessment (3 module)0.42 * exam + 0.18 * Exam (Banking) + 0.12 * home assignment (banking) + 0.28 * Home assignments
- DeFusco, R. A., McLeavey, D. W., Pinto, J. E., & Runkle, D. E. (2015). Quantitative Investment Analysis (Vol. Third edition). Hoboken, New Jersey: Wiley. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsebk&AN=1082450
- Pinto, J. E. (2015). Equity Asset Valuation (Vol. Third edition). Hoboken, New Jersey: Wiley. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsebk&AN=1083933