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Valuation and Investment Banking

Credits	Three
Faculty Name	Rajiv Bhutani
Program	BM Program
Academic Year and Term	2019-2021, Term IV

Course Description: This course will give students a broad and deep view of valuation concepts and practice. We will learn financial and economic theory and apply it to value different businesses. Taking this course will help students develop a framework to estimate the intrinsic worth of a firm. We will also see the implications of business and corporate finance decisions on a company’s valuations. It goes without saying that we will learn standard methods to estimate discount rates, estimate cash flows, value a firm using multiple methods like discounted cash flow methods, relative value method, asset based methods, option based valuation etc. We will also learn how to value intangible and some advanced concepts. We will use examples and a few cases to see the applicability of different valuation concepts in practice. Apart from the theoretical constructs, we will also devote a session to understand art and science of valuation as practiced by Warren Buffet.

Note: Since this year Finance group is not offering Corporate Restructuring, we will cover some topics from Corporate Restructuring within this course. So, this year the course will also cover Mergers and Acquisitions, Divestitures and Spin-Offs. We will also cover IPOs and structured products.

Learning Objectives: After completing this course, a student should learn following:

1) Learn how to estimate discount rates and cash flows, for a real world firm with all associated complexities

1) Techniques of corporate valuation viz. discounted cash flow methods, relative value method, asset based methods, option based valuation etc.

2) Value both established businesses and upcoming highly risky businesses, value both small or large businesses, domestic or foreign businesses.

3) Value private firms from the perspective of private equity and venture capital funds and for the purpose of IPO.

4) Value distressed assets and leveraged buy outs.

5) Value new age innovative internet companies with negative cash flows for years and almost no comparables.

6) Value executive stock options that companies give to employees to reduce agency conflicts.

7) Learn correct measurement of simple to understand but hard to quantify concepts like equity risk premium, discount factors etc., especially in complex real-life situations.

8) Concept of synergy and its applications in Mergers, Acquisitions, Spin-Offs and Divestitures

9) Initial Public Offering – Mechanics and Valuation

10) Need, design and valuation of Structured Products

Pedagogy: The course uses a mix of lectures and examples and lots of cases to illustrate real life application of basic valuation concepts. Assignments are an integral part of the course and solving them will help you to deepen your understanding of the subject. Instead of a monologue, I encourage active participation in the class. You will find me asking a lot of questions in the class. You will derive the maximum value from the course, if you read the assigned readings before coming to the class.

Recommended Course Text Book:

Damodaran on Valuation, 2nd Edition – Aswath Damodaran

Recommended Reference Material:

1) Security Analysis – Graham and Dodd

2) Warren Buffet’s annual reports

3) Aswath Damodaran website viz. http://pages.stern.nyu.edu/~adamodar/

Evaluation:

1) Class Participation – 10%

2) Group Project – 25%

3) Quizzes – 10%

3) Assignments – 25%

4) End Term – 30%

Session Plan:

Session	Topics	Cases/Readings
1	Introduction – Financial Statement Analysis	Identify Industry:Analysis of Fin Statement-Thunderbird
2	Inputs & Processes: Discount Rates
3	Inputs & Processes: Discount Rates	Encana Corporation_The Cost of Capital – IVEY
4	Inputs and Processes: Cash Flows
5	Inputs - Equity Research Analysts
6	DCF Methods in Action – Equity Valuation	Teuer Furniture (A): Disc. Cash Flow – Kellogg
7	DCF Methods in Action – Firm Valuation	Valuation of Air Thread Connections – HBS
8	Relative Valuation
9	Relative Valuation	Standard Chartered: Valuation & Cap St – IVEY
10	Valuation of Internet Age Firms
11	Real Options in Valuation
12	Delay, Expand and Abandon Option
13	Mergers, Acquisitions, Spin-Offs & Divestiture
14	Mergers, Acquisitions, Spin-Offs & Divestiture	Roche’s Acquisition of Genentech
15	Leveraged Buy-Out	Seagate Technology Buyout – HBS
16	Valuing ESOPs and Intangibles Valuation
17	Valuation & Acquisition of Distressed Assets	Buffett’s Bid for Media Gen Newspaper – HBS
18 & 19	IPO and Structured Products
20	Project Presentation

Academic Integrity: (taken verbatim from the University of Texas, Dallas, format):

The faculty expects from its students a high level of responsibility and academic honesty. Because the value of an academic degree depends upon the absolute integrity of the work done by the student for that degree, it is imperative that a student demonstrate a high standard of individual honor in his or her scholastic work.

Scholastic dishonesty includes, but is not limited to, statements, acts or omissions related to applications for enrollment or the award of a degree, and/or the submission as one’s own work or material that is not one’s own. As a general rule, scholastic dishonesty involves one of the following acts: cheating, plagiarism, collusion and/or falsifying academic records. Students suspected of academic dishonesty are subject to disciplinary proceedings.

Plagiarism, especially from the web, from portions of papers for other classes, and from any other source is unacceptable and will be dealt with under the university’s policy on plagiarism (see general catalog for details). This course will use the resources of turnitin.com, which searches the web for possible plagiarism and is over 90% effective.

Created By: Debasis Mohanty on 04/22/2020 at 08:48 AM
Category: BM 19-21 T-IV Doctype: Document