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A zoomin, zoomout, connectthedots tour of Equity valuation
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Section 1: You, Us & This Course  

Lecture 1  01:50  
This is a zoomin, zoomout, connectthedots take on equity valuation, ideal for finance professionals, MBAs, and aspiring entrepreneurs with an eye on the money. 

Section 2: Price, Value and Valuation  
Lecture 2  02:42  
In finance, as in life, price and value are all too easy to mix up. 

Lecture 3  01:38  
Intrinsic value is intangible, so it can only be estimated (by models), not measured. 

Lecture 4  04:38  
For a publicly traded firm, market capitalisation is synonymous with valuation. The difference between value and valuation is what keeps the investing industry alive and awake, however. 

Lecture 5  09:09  
Going concern, liquidation, or sumoftheparts? Take your pick of valuation models. 

Section 3: NPV and Discounting Cash Flows  
Lecture 6  04:15  
Absolute valuation models focus on a point estimate of intrinsic value. They are invariably based on the concept of Net Present Value. 

Lecture 7  10:28  
The idea of Net Present Value (NPV) is one of the most fundamental in all of finance  and it all starts with compound interest. 

Lecture 8  07:28  
NPV and price are related: if NPV > price, the asset is undervalued, and should be bought ASAP! If NPV < price, the asset is overvalued  don't buy it. 

Lecture 9  04:35  
Calculate the NPV of a cash flow in the future. The cash flow is deterministic, btw. 

Lecture 10 
Future Value of a Present Cash Flow

01:53  
Lecture 11  04:11  
The higher the compounding frequency on the riskfree instrument, the higher the discount rate. 

Lecture 12  03:43  
Taken to its limit, compounding could be continuous. This yields the highest possible discount factor, given a certain discount rate. 

Lecture 13  05:00  
Calculating the NPV of a stream of cash flows in the future is one of the most common usecases in all of finance. Its used across bond math as well as corporate finance. 

Section 4: Valuing Uncertain Cash Flows  
Lecture 14  11:06  
Discounting risky cash flows presents a challenge: you can either increase the discount rate (by riskadjusting it) or decrease the cash flow (replace it with its certainty equivalent). Almost everyone does the former. 

Lecture 15  11:17  
Assets with the same risk should offer the same return. This is the principle underlying riskreturn models. We see a simple example of a riskreturn model, calculating the cost of debt for a firm from its credit rating and the duration of the borrowing. 

Lecture 16  16:53  
The CAPM is the most widely known and widely used riskreturn model for equities. Understand how the CAPM works, what market beta is, and how the ERP can (or rather can not) be cleanly measured. 

Lecture 17  06:49  
The overall cost of capital for a firm with both debt and equity is given by the wacc. This is a weighted average of the costs of debt and equity. The weights used in the average? The market prices of debt and equity respectively. 

Lecture 18  06:43  
Interest expenses are pretax, while dividend payments are not. So, from the pointofview of a firm, we need to reduce the cost of debt using an adjustment for the tax shield. 

Lecture 19  02:21  
Be careful to use the WACC for all cash flows related to a firm. This leads to a few strange situations (eg negative cash flows) but at least it is consistent and transparent. 

Lecture 20  05:57  
Topdown betas are obtained from regression, but are very noisy (standard errors in regressions are quite large!) Instead, we should use bottomsup betas, especially for conglomerates. Understand the intuition, as well as the outline of the procedure. 

Lecture 21  03:34  
If you are valuing a private company, the beta you really ought to use in your WACC calculation is not the market beta, its the total beta. 

Lecture 22  02:55  
The beta that we get via regression, or (on Yahoo FInance:)) is a levered beta, which reflects the market comovement of a company at its current level of leverage. There is a simple way to unlever and relever betas. 

Lecture 23  06:59  
Debt is an important part of WACC. Don't forget to take operating leases as well. 

Lecture 24  01:41  
Don't forget leases, including operating leases! 

Section 5: Dividend Discount Models  
Lecture 25  09:10  
Dividend Discount Models are a specific family of absolute value models that discount dividends. These can seem simplistic, but have a lot of simple wisdom embedded within. 

Lecture 26  05:38  
DDM have a neat relationship between the price of a stock today, its price in the future, and the dividends in the period in between. 

Lecture 27  06:25  
Depending on the company's growth and stage in its lifecycle, different DDM profiles can be applied to model its growth. 

Lecture 28  09:34  
A cash cow is a company with zero growth. Cash cows are not as uncommon as you might think  look no further than many stateowned resource firms. 

Lecture 29 
Sustainable Growth Rate of Equity

10:55  
Lecture 30  05:27  
The Gordon Growth Model works best for stablegrowth, dividend paying companies. 

Lecture 31  04:38  
Micro Econ 101 dictates that firms experience a period of extraordinary growth early in their lives, before perfect competition sets in. At that point, growth subsides. We explore a few Dividend Discount Models that allow us to model this. 

Section 6: Free Cash Flow Models  
Lecture 32  13:59  
Free Cash Flow valuation is conceptually similar to Dividend Discount Valuation, but the FCF method can be used for a far wider range of firms, and in a far wider range of situations. This is the real deal in equity valuation. 

Section 7: FCFF and FCFE Details  
Lecture 33  10:16  
FCFF is free cash flow available to all providers of capital to the firm (both debt and equity). FCFE is the free cash flow available only to equity holders. 

Lecture 34  10:17  
The easiest way to calculate FCFF is from the Cash Flow Statement. FCFF is basically Cash Flow from Operations (CFO), minus Investments in Fixed Assets, plus taxadjusted interest expense. 

Lecture 35  03:23  
FCFE is simply FCFF minus payments from the equity holders to the debt holders, plus payments from debt holders to equity holders:) 

Lecture 36  05:39  
FCFF and FCFE each have their strengths and weaknesses. We also discuss an alternative discounting method of valuation, called the Adjusted Present Value (APV) method, which discounts FCFF using the cost of equity. This allows valuation with having to calculate the WACC, but it is tricky for another reason: determining the costs of financial distress. 

Lecture 37  06:57  
There are 2 reasons why Net Income can't be used: for one, it does not take into account investments that are required to maintain the operations of the firm in the future, and for another, it includes various noncash items, notably depreciation. EBITDA has both of these flaws, and in addition, it also has a third: it is a pretax measure. And of course taxes have to be deducted from any measure of cash flows to the capital providers of a firm (the government is not, usually, a capital provider!) 

Lecture 38 
FCFF from Net Income or EBITDA

08:26  
Lecture 39  09:29  
We discuss noncash charges, preferred stock (include in FCFF, remove from FCFE), nonoperating assets, and forecasting FCFF and FCFE 

Section 8: Relative Valuation  
Lecture 40 
Introducing Relative Valuation Models

06:36  
Lecture 41 
The P/E Ratio: Pros and Cons
Preview

06:05  
Lecture 42 
Mechanics of calculating the P/E ratio

08:38  
Lecture 43 
Market P/E and Macroeconomics

04:31  
Lecture 44 
Other Valuation Ratios: P/B and EV/EBITDA

05:53  
Section 9: Capital Structure and the MM Propositions  
Lecture 45  17:28  
The proportion of debt and equity that a firm chooses is known as its capital structure. We also look at 3 important decisions that firms have to make: the investment decision, the financing decision, and the dividend decision. 

Lecture 46  16:21  
The second of the famous ModiglianiMiller propositions is easier to arrive at intuitively than the first, so let's start there  we see how leverage makes good times better, and bad times worse. 

Lecture 47  13:14  
We now circle back to the first, and more famous, ModiglianiMiller proposition: leverage, by itself can not change the value of a company. 

Lecture 48 
Behind the Numbers: The Intuition Behind MM

07:53  
Lecture 49  09:09  
The MM propositions, as we studied them so far, made some important assumptions about the world a firm operated in  the most important and unrealistic of these was the absence of taxes. Let's now factor in the effect of taxes. 

Lecture 50 
Wrapping up MM in a world with taxes

11:40 
Loonycorn is us, Janani Ravi, Vitthal Srinivasan, Swetha Kolalapudi and Navdeep Singh. Between the four of us, we have studied at Stanford, IIM Ahmedabad, the IITs and have spent years (decades, actually) working in tech, in the Bay Area, New York, Singapore and Bangalore.
Janani: 7 years at Google (New York, Singapore); Studied at Stanford; also worked at Flipkart and Microsoft
Vitthal: Also Google (Singapore) and studied at Stanford; Flipkart, Credit Suisse and INSEAD too
Swetha: Early Flipkart employee, IIM Ahmedabad and IIT Madras alum
Navdeep: longtime Flipkart employee too, and IIT Guwahati alum
We think we might have hit upon a neat way of teaching complicated tech courses in a funny, practical, engaging way, which is why we are so excited to be here on Udemy!
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