Fall 2004
Robert Conroy
Ken Eades
VALUATION IN FINANCIAL MARKETS
This course focuses on how financial assets and firms are valued in financial markets.
While a key objective of the course is to provide valuation skills employed in finance elective
courses, the course will also apply valuation models to real financial data and assets. The course
is organized in two modules. We open with a module on valuing traded financial assets in the
options and fixed income areas. Our focus is on financial assets that have fairly complicated
structures. The second module focuses on valuing companies and the implication for their stock
prices. In addition to models introduced in the First Year Finance course, we discuss other
valuation approaches and the relative merits of each.
Requirements
During the course students are expected to be prepared for each class. Grading will be
based on class participation (25%), periodic graded assignments (25%) and a final exam (50%).
Some of the reading assignments will be drawn from Brealey and Myers, Principles of Corporate
Finance (7th edition). This text (hereafter BM) is a standard finance text and the finance faculty
recommends that students purchase the book as a reference text, which will be useful for future
finance courses and on the job (Note that this was the same text and edition that was
recommended for last year's first year finance course.).
Webpage
There is a course web page, which has a full course outline. It is located at
http://faculty.darden.edu/conroyb/valuation/val2004/Valuation Syllabus04.htm
Fall 2004
Fall 2004
VALUATION IN FINANCIAL MARKETS
COURSE OUTLINE
1.
Wednesday, September 1, 2004
Put-Call Parity
Case: Smith Barney
2.
Thursday, September 2, 2004
Option Valuation Models
Lecture and Problems
3.
Thursday, September 9, 2004
Option Valuation Models
Case: Non-Standard Options
4.
Friday, September 10, 2004
Duration and Convexity
Case: The Walt Disney Company: 100-Year BondsSleeping Beauties?
5.
Wednesday, September 15, 2004
Term Structure of Interest Rates
Case: Pricing Strips and the Term Structure
6.
Thursday, September 16, 2004
Pricing Interest Rate Swaps
Lecture and Problems
7.
Wednesday, September 22, 2004
Interest Rate Swaps
Case: G & P Greetings Inc.
8.
Thursday, September 23, 2004
Convertible Bonds
Case: Cypress Semiconductor: 1.25% Convertible
Notes
9.
Friday, September 24, 2004
Valuing a Company
Case: Carrier and Tyler Refrigeration
10.
Wednesday, September 29, 2004
Methods for Valuing Companies
Lecture and Problems
Fall 2004
Reading: Valuing CompaniesAn Overview of
Analytical Approaches
Using APV: A Better Tool for Valuing Operations
11.
Thursday, September 30, 2004
Adjusted Present Value
Case: Benninger Packaging, Inc.
12.
Thursday, October 7, 2004
Equity Residual Approach to Valuation
Case: Superior Industries International
Readings: A Comparison of the Weighted-Average
Cost of Capital and Equity Residual Approaches to
Valuation Using the Equity Residual Approach to
Valuation: an Example
13.
Friday, October 8, 2004
Equity Residual Approach to Valuation
Case: Aqua Company
14.
Wednesday, October 13, 2004
Valuation of Acquisition Terms
Case: Genentech/Roche Holdings, Ltd.
15.
Thursday, October 14, 2004
Valuation Overview
October 15-19, 2004
Exams
Fall 2004