STERN SCHOOL OF BUSINESS
NEW YORK UNIVERSITY
B40.3331
Equity Instruments & Markets
Navin Chopra
Winter 2008
Syllabus
PURPOSE OF THE
COURSE
This course focuses on valuation. The objective of this course is to
teach firm valuation methods. The approach utilizes accounting and
finance concepts for valuing firms. Little new finance theory is
introduced in this course. The emphasis is on the practical
applications. Topics include financial statement analysis, capital
budgeting methods, estimating cash flows, estimating cost of capital,
valuation of projects, valuation of companies and valuation of
strategic options. This course uses the case method. The course
presumes that you have a good grasp of basic finance and
accounting concepts.
INSTRUCTOR
Navin Chopra
Phone:
212-998-0072 (voice)
E-mail: nchopra@stern.nyu.edu
TEACHING
ASSISTANT
Anil Chinthakindi (akc283)
CLASS
MEETINGS
Sat 1/5/08
Mon 1/7/08
Wed 1/9/08
Sat 1/12/08
Mon 1/14/08
Wed 1/16/08
Sat 1/19/08
Mon 1/21/08
Wed 1/23/08
REQUIRED TEXT
& CASE PACKET
The following cases are included in the case packet available for
purchase at the book store:
•
•
•
•
•
•
•
9-4
6-9
6-9
9-4
6-9
6-9
9-4
6-9
6-9
Clarkson Lumber
Toy World
Massey-Ferguson
Eskimo Pie
Note on Pre-Money & Post-Money VC Valuation
HCA, Inc.
Netflix IPO
The following textbook is required:
RECOMMENDED
Valuation: Measuring and Managing the Value of Companies by Tim
Koller, Marc Goedhart, and David Wessels, 4th (university) edition,
2005, John Wiley & Sons. Be sure to buy the university edition (softcover, no CD).
Any good corporate finance textbook will do. The following two are
TEXT
my recommendations:
Principles of Corporate Finance by Brealey, Myers, and Allen (it
maybe listed under the Corporate Finance class). 8th edition, 2006.
Corporate Finance by Ross, Westerfield, and Jaffee, Irwin/McGrawHill, Seventh edition, 2005.
CLASS NOTES
I will post lecture notes and other materials in Blackboard.
CLASS
ATTENDANCE
I cannot emphasize enough the importance of class attendance in
this course. Because there is no specific textbook and because there
is little by way of lecture notes, lectures are particularly important for
this class. While attendance is not mandatory, attendance will be
taken in every class.
COURSE
REQUIREMENTS
The final grade will be based on a final exam, 2 group case
analyses, and class participation.
GRADE
DETERMINATION
The weights for the various deliverables are as follows:
2 Case Analyses (group submission)
30%
Final Exam
50%
(Wed, Jan 23)
Class Participation
20%
The finance department suggests the following distribution of grades
for this course: A (15%), B (60%), C (20%), D & F (5%).
GROUP CASE
ANALYSES
This must be done in groups of upto 3 members. The cases will be
chosen by me. Your submission should not exceed 3-5 pages.
PREREQUISITES
The foundations of finance class, B01.2311, is a pre-requisite for this
class. Additionally, it would be very helpful if you have taken also
taken a Corporate Finance course.
Topics:
I.
Core Valuation Topics
a. Introduction to Course & Valuation
b. Core valuation concepts of DCF analysis
c. Value created from financing
d. Effect of leverage on valuation
e. Analyzing historical relationships – financial ratios, ROIC
f. Identifying value drivers
g. Estimating terminal values
h. Implementing DCF analysis
i. Forecasting
j. Cost of capital – WACC, cost of equity etc.
k. Adjusted present value (APV)
l. Wall Street’s favorite valuation technique – multiples valuation
II.
Advanced Valuation Topics:
a. Valuing multi-business companies
b. Valuing high-growth, cyclicals, financial companies
c. Handling advanced accounting issues – R&D, leases, goodwill etc.
d. EVA and the excess earnings valuation model (Optional topic)
e. Valuation of mergers
f. LBOs
g. Venture capital valuation
h. IPOs