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Market o iinformation asymmetries nformation question

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