FINA 410 Lecture Notes - Lecture 2: Stock Valuation, European Cooperation In Science And Technology, Dividend Policy
26 Jan 2017
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Document Summary
Advantages of classifying models: easier to understand where individual models fit into big picture, why they provide different results, why they have fundamental errors in logic. 3 different approaches to valuation: 1. Discounted cash flow valuation: relates value of an asset to present value of expected future cash flows on that assets: 2. Relative valuation: estimates value of asset by looking at the price of comparable assets relative to a common variable such as earnings, cash flows, book value or sales: 3. Contingent claim valuation: uses option pricing models to measure the value of assets that share option characteristics. Non traded: real options based on projects, patents, oil reserves Foundation on which all other valuation approaches are built. This section considers the basis, the philosophical rational for dcf, and an examination of different approached to dcf. Value of asset is the pv of the expected future cash flows on it.
