1. Chapter 1: Why Corporate Valuation?
You make financial decisions every day
Investors—buy and sell decisions
Managers—implement operating decisions
Financial staff—evaluate acquisitions
Success or failure depends on whether you correctly identify value

2. Goals
Provide investors and managers with the basic knowledge to value a company
Use free cash flow valuation
Use non-proprietary Excel model
Online data sources—plus Thomson ONE-Business School Edition

3. How you might use this model
Investors use it to identify undervalued stocks
Investors use it to asses fund manager performance
Managers use it to make better business decisions
Managers and investors perform scenario analysis

4. Our plan of attack
Finance requires a circular approach: you need to know finance in order to do financial analysis. You need to know how to do financial analysis to understand finance. We approaches it simply and slowly increases the level of detail.

5. Discounted Cash Flow (DCF)
DCF analysis is at the heart of valuation
Basic concepts
Present value
Discount rate– Weighted Average Cost of Capital (WACC)
Free cash flows (FCF)
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6. Present Value Present value = $1/(1 + r)
If r = 9%, PV = $1/(1.09) = $0.917
A dollar to be received in 1 year is worth 91.7 cents today if the discount rate is 9 percent.
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7. WACC and FCF
WACC is the rate of return on average that all of a company’s investors must earn to be satisfied
FCF is the amount of cash flow available for distribution to all of firm’s investors (debtholders and shareholders) after making investments necessary to support growth plans.
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8. Do I have to become an accountant?
NO! But accounting helps, so the book teaches some accounting skills.
You will also learn some Excel skills, and how to use online sources of data, including Thomson ONE-Business School Edition.
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