FINM7044 Applied Valuation

Semester 2, 2016
Instructor: Xianming Zhou
E-mail: xianming.zhou@anu.edu.au
Consultation hours: Monday 2pm-5pm

The course web content has not been updated;

Please follow course information posted on wattle!

Course Introduction 1

Course Objectives
The purpose of this course is to offer students an
application-oriented approach to understanding how
concepts and theories of finance are applied to investment
decisions. Students will learn to value corporate entities
using various techniques, including discounted cash flow
and multiple based valuations. The methods and analytical
techniques discussed in this course are heavily used in
practice, which are helpful not only to financial managers
in modern corporations but also to investors in financial
markets.

Course Introduction 2

Textbook and Course Materials

Prescribed textbook: Damodaran, A. (2012), Investment
Valuation, Wiley & Sons (3rd University edition)

Lecture notes: available on the course wattle site

Valuation cases: to be distributed in class

Recommended reading: Ross, S., Westerfield, R., and Jaffe,

J., (2013) Corporate Finance. McGraw-Hill (10th edition) (RWJ)

Course Introduction 3

Course Assessment
Assessment summary
Assignment 1 (Problem Set 1):
Assignment 2 (Problem Set 2):
Assignment 3 (Case 1 Study Questions):
Assignment 4 (Case 2 Study Questions):
Final exam:

6%
4%
11%
11%
68%

Format and requirement

3 hour lectures per week; no tutorials
Review questions & solutions to be posted regularly
All assignments are group work
Final exam: true-or-false questions, short questions
No case specific questions
Similar to exams of previous semesters
Course Introduction 4

Study Groups
Form your study team by the end of week 2, each
comprising 4 to 5 students.

Class attendance is not compulsory. However, it is your

own responsibility to obtain, in a timely manner, any
information and materials distributed in class.

Class announcements: post in wattle

At the conclusion of this course, each student will submit a

confidential assessment of each group members overall
contribution to the groups work and performance.

Course Introduction 5

Other Matters
Submission of assignments
In class
Hard copy plus supporting spreadsheets
No late submission (zero mark for late submission)

About this course

Application oriented
Understanding of theories, economic intuition

Use of valuation cases

Learning by doing, demanding
Group work (effective collaboration is important)
No standard solution; no video record of case discussions
Course Introduction 6

Other Matters
Scaling: scaling may apply to your final mark (which will
preserve the rank order of students raw marks)
High Distinction (HD)
Distinction (D)
Credit (CR)
Pass (P)
Fail (N)

80 100
70 79
60 69
50 59
0 49

Misconduct
http://www.anu.edu.au/cabs/rules/DisciplineRules.pdf
About plagiarism: http://academichonesty.anu.edu.au/
Zero tolerance to cheating

Course Introduction 7

Course Schedule
Week

Topics of Lecture

Reading

Introduction to valuation

Damodaran Chs 1 & 2

Financial statements, cash flows, forecast

Damodaran Chs 3, 9 & 10

Risk and expected return

Damodaran Chs 4 & 7; RWJ Ch 11

Cost of capital and capital structure

Damodaran Ch 8; RWJ Ch 13

NPV, valuation of bonds and stocks

RWJ Chs 8 & 9

6
7
8
9
10
11
12
13

DCF valuation
Relative valuation
Valuing private firms and IPOs
Case 1: IPO valuation
Takeover valuation, LBOs
Case 2: Valuation of an LBO

Damodaran Chs 12, 14 & 15

Damodaran Chs 17, 18 & 19
Damodaran Ch 24
DSB case: Warrant Buffet, 2005
Damodaran Ch 25
HBS case: Berkshires bid for Carters

Other issues in valuation

Final exam review

Lecture notes

Course Introduction 8