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VAL-P09
(PGDM 2009-11 : Term-V)

VALUATION
(Faculty: Prof. Banikanta Mishra)


Course Content: Building on the basics of Valuation that you were exposed to in Financial Management, this course would familiarize you more intimately with the building-blocks of valuation. We will learn about different valuation methods and consistency between them as well as about treatment of capital structure under different situations (like constant debt and constant debt-ratio). In this light, we will talk about cost of capital and the interaction between investment and financing decisions. We will also learn about different alternatives to the DCF valuation approach, namely, Direct Comparison Approach (including Multiple Approach) and the Adjusted Book Value Approach. If time permits, we will take up valuation of LBOs, real options, and convertibles and touch upon corporate control transactions.

References: You may refer to one or more of the following texts depending on the topic: Valuation by Sheridan Titman and John Martin, Corporate Finance: A Valuation Approach by Simon Benninga and Oded Sarig, Investment Valuation by Aswath Damodaran, Business Analysis & Valuation by Krishna Palepu, Paul Healy, and Victor Bernard, Corporate Valuation by Bradford Cornell, Valuation: Measuring and Managing the Value of Companies by McKinsey& Company, Tom Copeland, Tim Koller, and Jack Murrin, Valuing a Business by Shannon Pratt, Robert Reilly, and Robert Schweihs, Determining Value by Richard Barker, and Financial Markets and Corporate Strategy by Mark Grinblatt and Sheridan Titman. For cases, you would need to refer to Case Problems in Finance by Carl Kester, Richard Ruback, and Peter Tufano (McGraw Hill International Edition, Twelfth Edition).

Attendance and CP (Class Participation): All students are expected to take an active part in class discussions. It is not enough for a student to do well in the above-cited quizzes/examinations and assignments. Class-participation is an integral component of the learning process. Therefore, I would urge you to come well-prepared to the class, to answer questions when called upon to do so, and to raise interesting issues for discussion. For each class, I would give you a score between 0 and 10. If you miss a class or are inactive, you would get 0 for that class. Each class carries a weight of around 0.50%; thus, the total weight on CP for the scheduled 20 classes is 10%.

Grade: Your grade would determined by the following components: midterm exam (30%), final exam (35%), class participation (0.50% each class x 20 = 10%), and five group-case-reports (5% each x 5 = 25%). Your performance in the course would be determined by your weighted-average-score in percentage (WASP) in the above. Each group should consist of 3-4 students; please let me know as soon as you have formed your group. (Detailed instruction on how to write case-reports would be provided later.)

Grading Scale: Your course-grade would be determined as per the following rule.

If your WASP is less than 70, you may get a grade below C (that is, D+, D, or F).
If your WASP is 70 or more OR in the top 80% of class, then you are guaranteed a C or above.
If your WASP is 80 or more OR in the top 40% of class, then you are guaranteed a B or above.
If your WASP is 90 or more OR in the top 10% of class, then you are guaranteed an A or above.

Code of Ethics: You must abide yourself by the (unwritten?) Code of Ethics for Students. For individual assignments/examinations, it is unethical to seek any direct help from others, whether or not you finally make use of the help. Discussions among individual students (except in the examination hall or class-room) are, of course, always encouraged. But, the final report or solution should be totally in the individual’s own style and language; any form of copying from one another or from any outside source is forbidden. Your basic purpose should be to learn, without resorting to any unfair means for getting a higher score or QPI. If you resort to any unfair means, you would receive an F in the whole course, not merely in the component for which you violate the code.

Examinations: These closed-book examinations would typically have both conceptual questions and numerical problems (short, medium, long). I would provide you with formulae; you are not allowed to bring any formula-sheet to the examinations. Examinations would last for around 90-180 minutes. There will be no make-up examination, unless you miss the regular one due to a proved “emergency”.

Some Basic Examination Rules: You would be given either a question-cum-answer paper or a question paper with an attached answer-paper. In the former case, you would be given a specific amount of space following each question for writing your answer. In the latter, you would be given a specific total number of pages to write your answers in; you should use both sides of each sheet and show your answers in ascending order (answer to Q.1 first, followed by answer to Q2, and so on), leaving half-inch gap between your answers. In all cases, leave half-inch margin on both left and right sides. Read instructions, if any, on the question/question-cum-answer book; if an instruction therein conflicts with one given here, then it overrides the one given here. If not specifically asked to use a pen, you may use either pen or pencil. Write legibly; if I cannot read what you have written, I will not give you any points for the relevant portion. Unless merely asked to tick the right answer, explain clearly all your derivations and answers; if no explanation is given, no credit will be given for merely ticking or jotting down the correct answer. Be precise; clumsy writing and imprecise or unnecessarily lengthy answers will be penalized. You are not allowed to seek any clarifications from anyone (not even your instructor) during examinations; if a question is wrong or unclear, just state why the question is wrong/unclear and, if possible, make an assumption and answer the question. If you are found to be justified doing what you did, you will get full points; or else, you would receive less (even zero).

No-names Policy: In all your assignments (examinations, reports, quizzes, projects), mention only your roll-number (only on the very back page), not your name. If you write your name, you would be heavily penalized.

Feedback: Feedback is always useful, even for the most seasoned veteran. In that spirit (but, of course, without claiming to be either seasoned or a veteran), I would request you to submit the midterm-evaluation on the date mentioned at the top of the midterm-evaluation-form (included). The final evaluation-form, which is different from the "official" one you would receive from the Dean's Office, also asks some specific questions regarding topics and cases (which are not touched upon by the official form). I would be thankful if you submit it to me on the day of the final examination (just before the exam). I would also request you to give me continuous “informal” feedback; toward this, the class may like to form a “focus group” (consisting of 6-7 students from the class with diverse backgrounds) that continuously interacts with the students and informs me about their problems, if any, with the course.

Indicative Schedule: The Indicative Schedule on the next page gives you an idea about the chronological sequence of topics I plan to cover and the amount of time I plan to spend on each topic. It is by no means binding. I would try my best to ensure that you understand a topic well before moving on to the next topic. Based on my past experience, I, of course, believe that we shall be able to cover most, if not all, topics mentioned in the Indicative Schedule.

Concerns and Contact Details: Though I am usually available in my office, please check beforehand. I also may come in for a few hours on weekends (the timings vary) and would try to give you a weekend appointment if you need one. You can, of course, always reach me by e-mail at my XIMB-id or at banikanta@hotmail.com. If you have any concerns regarding the course, you should discuss them with me. But if there are some concerns that you cannot discuss with me or regarding which you fail to get any satisfactory result after discussing with me, you should approach the A&F Area Coordinator.


Indicative Schedule
Session
Topic(s)
1-2
Capital Budgeting and Capital Structure: Recap
3-4
Valuation: Recap
5-6
Methods of DCF Valuation
7-8
Consistency between Valuation Methods
9-10
LBO Valuation
11
Valuation Using Comparables;
Valuation of Real Estate
12
Decision Tree Analysis; Binomial Tree
13
Valuation of Real Options
14
Cross-Border Valuation
15
Case-1: Net Flix
16
CASE-2: Whirlpool Europe
17
CASE-3: Tree Values
18
CASE-4: Cost of Capital at Ameritrade
19
CASE-5: Sampa Video
20
REVIEW

Created By: Bijoy Kar on 08/26/2010 at 05:29 PM
Category: PGP-II Doctype: Document

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