Session5_Stocks.pdf - Valuing the Firm(Stock Valuation...

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Valuing the Firm (Stock Valuation) Jiangmin Xu
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The Valuation Principle In our analysis of bonds, we determined that Price(Security) = PV(Future Cash Flows) where the PV is evaluated using competitive market prices How can we apply this to equities? Some key issues to resolve: What are the cash flows from holding equity? How does risk affect our analysis? How does the investor’s horizon affect our analysis? © Jiangmin Xu
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