Unformatted text preview: o iinformation asymmetries?
nformation Question 6: Intrinsic Value
Question What is it?
What Value obtained from performing a DCF analysis of
the firm’s expected cash flow Highly subjective Still the only logical way to evaluate investments Conclusion – Question 8
Conclusion An exceptional investor
o “Sage of Omaha” Can he maintain his performance?
o Should the shareholders endorse the acquisition?
Should Wrap-up: Case thems
Wrap-up: Information in prices
– Prices respond quickly to announcements
– Prices reflect DCF
– Prices also reflect speculation, day trading, bubbles
Basic Finance Concepts
– Economics versus accounting
– Opportunity costs
– Time Value and DCF
– Valuation by ‘comparables’
– Risk-return tradeoffs
– Market efficiency/information asymmetries
– Investing based on hunches/speculation vs.
Difficulties implementing concepts
– Insufficient information for valuations (comparables for target)
– Estimating discount rate/cost of capital
– Performance of investments (Big 4)
– Prices also reflect speculation, day trading, bubbles...
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- Fall '14
- Accounting, Berkshire Hathaway, Warren Buffett, Warren E. Buffett