UST+GS+-+Investment+Management+-+Discounted+Cash+Flow+(DCF)

UST+GS+-+Investment+Management+-+Discounted+Cash+Flow+(DCF)...

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Valuation Process Understanding the business. Forecasting company performance. Selecting the appropriate valuation model. Converting forecasts to a valuation. Making the investment decision.
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Approaches to Equity Valuation Discounted Cash Flow Techniques (DCF) - Present Value of Dividends (DDM) - Present Value of Free Cash Flow to the Firm - Present Value of Free Cash Flow to Equity Relative Valuation Techniques - Price/earnings Ratio (P/E) - Price/Cash Flow Ratio (P/CF) - Price/Book Value Ratio (P/BV) - Price/Sales Ratio (P/S)
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Discounted Cash Flow Valuation Approaches Measure of cash flow - Dividends - Free Cash Flow to the Firm - Free Cash Flow to Equity Used to derive intrinsic value. Dependent on growth rates of cash flows and estimate of the discount rate.
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Relative Valuation Techniques Provide information about how the market is currently valuing securities. Does not provide guidance whether current valuations are appropriate. Appropriate to use when: - Have a good set of comparable entities, i.e., comparable companies similar in terms of industry, size, and risk. - Not either seriously undervalued or overvalued.
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