Chapter_13 - Part III Part Forecasting Forecasting and and...

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Part III Part III Forecasting Forecasting and and Valuation Analysis Valuation Analysis
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Forecasting and Valuation Forecasting and Valuation Analysis Analysis 1 Knowing the Business The Products The Knowledge Base The Competition Regulatory Constraints 2 Analyzing Information In Financial Statements Outside Financial Statements 3 Forecasting Payoffs Specifying Payoffs Forecasting Payoffs 4 Convert Forecasts to a Valuation 5 Trading on the Valuation Outside Investor: Compare Value with Price to BUY, SELL or HOLD Inside Investor: Compare Value with Cost to ACCEPT or REJECT Strategy Chapter 13 How operating activities are valued without the financing activities Chapter 14 How simple forecasts and simple valuations are a tool for analysis Chapter 15 How pro forma financial statement analysis provides a tool for forecasting
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Chapter 13 Chapter 13 Valuation of Operations and the Evaluation of Enterprise Price-to-Book Ratios and Price-Earnings Ratio
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The Valuation of Operations and the The Valuation of Operations and the Evaluation of Enterprise Price-to-Book Evaluation of Enterprise Price-to-Book Ratios and Price-Earnings Ratios Ratios and Price-Earnings Ratios \ Part II of the book showed how to analyze the operating and financing activities of a firm and the profitability and growth they generate. Link to Previous Chapter This Chapter Link to Next Chapter Link to Web Page This chapter develops valuations based only on operating profitability and growth and shows how to calculate intrinsic price-to- book ratios and P/E ratios for operations. Chapter 14 will develop simple forecasting and valuation methods based on the valuation models for operations in this chapter The web page has more coverage How can forecasting and valuation be simplified? Can financing activities be ignored in valuation if they do not generate value? What is an “economic profit” valuation model? How are intrinsic price- to-book ratios and P/E ratios calculated for a firm’s operations?
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What you will learn from What you will learn from this chapter this chapter How, for an asset at market value on the balance sheet, expected residual income in the future must be zero Why forecasted residual income (or expense) on financial assets and liabilities is typically zero How a valuation based on forecasting residual income from operations differs from a residual earnings valuation based on forecasting full comprehensive income How a valuation based on abnormal growth in operating income differs from an abnormal earnings growth valuation How return on net operating assets and growth in net operating assets are the two drivers of residual operating income and growth in operating income How the required return for operations and the required return for equity are related How the required return for equity can be broken down into an operating risk premium and a financing risk premium How financial leverage affects ROCE, earnings growth,
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Chapter_13 - Part III Part Forecasting Forecasting and and...

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