#13 - Getting Started with Intrinsic Valuation
from Cold Brew Money Hosted by Atit Kothari and Tapan Desai
Today we discuss: Why do you value a company? First principle: Opportunity Cost Your returns are determined by the price you pay It's a good anchor point If there is some event that pushes the whole market down, if you know the value you can pick up great companies at cheap prices Forces you to put in the work thereby avoiding obvious mistakes You need to find a dollar that is selling for fifty cents Intrinsic Valuation Present Value of future cash flow If you had to invest in a neighborhood lemonade stand? How much will you pay for it? Very simple lemonade example (https://docs.google.com/spreadsheets/d/1FBu2Td7vnva9DHSvWVOL3-XwTAQ1UtXT9Ihk5sO1G9E/edit?usp=sharing) Discount rate: Let’s say that you’d take $900 today instead of $1000 exactly a year from now. That means you’d accept a 11.1% “discount rate” on that transaction. Growth rate Terminal value
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