Topic_11_E2 - Topic 11 Exercise 2 Efficient Markets...

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Topic 11 Exercise 2 Efficient Markets Valuation of Dot-Coms The last half of the 1990s was the birth of the new economy as well as the birth of the new valuation models for stock. How do you value a company that has no earnings? How do you relate earnings to assets when most of the assets are intangible? The last half of the decade saw discussion of price multiples of sales and models that used rates of growth in new customers that seem to defy logic. In many cases, they did defy logic and the prices of the dot-com stocks crashed back to earth. In a recent McKinsey Quarterly entitled, “Valuing Dot-Coms After the Fall,” Timothy Koller describes how the market forgot some of the time-honored methods of valuation. After reading this analysis, answer the following questions: 1. If the market were completely efficient, should we have expected the dot-com bubble? What other recent examples of market valuation excesses does the author describe? If the market were truly and completely efficient, we would not have expected to see this
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This note was uploaded on 10/28/2009 for the course MBA MBA608 taught by Professor Martin during the Spring '09 term at Beirut Arab University.

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Topic_11_E2 - Topic 11 Exercise 2 Efficient Markets...

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