Session 3: DCF Overview and First Steps on Discount Rates
from Aswath Damodaran Hosted by Aswath Damodaran
This class started with a look at a major investment banking valuation of a target company in an acquisition and why having a big name on a valuation does not always mean that a valuation follows first principles. After setting the table for the key inputs that drive value - cash flows, growth, risk, we looked at the process for estimating the cost of equity in a valuation. The key concept is that of a "marginal" investor, who is diversified and looking at risk through that investor's eyes. We spent the rest of the session talking about what should be (but no longer is) the simplest input into the process: the risk free rate.Start of the class test: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/tests/kennecott.pdfSlides: http://www.stern.nyu.edu/~adamodar/podcasts/valUGspr17/session3.pdfPost class test: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session3test.pdfPost class test solution: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session3soln.pdf
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