Equity Valuation: Models From Leading Investment Banks Book

Pt. I Discounted Cash Flow (DCF) Models Jan Viebig Viebig, Jan Thorsten Poddig Poddig, Thorsten 1

1 Introduction 3

2 The Fundamental Value of Stocks and Bonds 5

3 Discounted Cash Flow Models: The Main Input Factors 11

Pt. II Monte Carlo Free Cash Flow to the Firm (MC-FCFF) Models (Deutsche Bank/DWS) Jan Viebig Viebig, Jan Thorsten Poddig Poddig, Thorsten 53

4 Introduction 55

5 Standard FCFF Model 57

6 Monte Carlo FCFF Models 85

Pt. III Beyond Earnings: A User's Guide to Excess Return Models and the HOLT CFROI Framework Tom Larsen Larsen, Tom David Holland Holland, David 107

7 Introduction 109

8 From Accounting to Economics - Part I 113

9 From Economics to Valuation - Part I 115

10 Where Does Accounting Go Wrong? 117

11 From Accounting to Economics: CFROI 119

12 From Accounting to Economics: Economic Profit 145

13 From Economics to Valuation - Part II 157

App. 1 Vodafone Financial Statements and Relevant Notes for CFROI Calculation 175

App. 2 Additional Notes from Vodafone Annual Report for EP Calculation 185

Pt. IV Morgan Stanley ModelWare's Approach to Intrinsic Value: Focusing on Risk-Reward Trade-offs Trevor S. Harris Harris, Trevor S. Juliet Estridge Estridge, Juliet Doron Nissim Nissim, Doron 193

14 Introduction 195

15 Linking Fundamental Analysis to the Inputs of the Valuation Model 199

16 Our Valuation Framework 203

17 Linking Business Activity to Intrinsic Value: The ModelWare Profitability Tree 211

18 ModelWare's Intrinsic Value Approach 219

19 Treatment of Key Inputs 231

20 The Cost of Capital 233

21 Summary and Conclusions 237

Appendix 239

Pt. V UBS VCAM and EGQ Regression-based Valuation DavidBianco Bianco, David 253

22 Introducing "EGQ" - Where Intrinsic Methods and Empirical Techniques Meet 255

23 A Quick Guide to DCF and Economic Profit Analysis 257

24 Regression-based Valuation 263

25 UBS Economic Growth Quotient 265

26 UBS EGQ Regression Valuation 269

27 Understanding Regressions 275

28 Appendix Discussions 281

Pt. VI Leverage Buyout (LBO) Models Jan Viebig Viebig, Jan Daniel Stillit Stillit, Daniel Thorsten Poddig Poddig, Thorsten 293

29 Introduction 295

30 Leveraged Buyouts 297

31 IRRs and the Structure of LBO Models 301

32 Assumptions of LBO Models 307

33 Example: Continental AG 317

34 A Word of Caution 329

Pt. VII Valuation 101: Approaches and Alternatives Aswath Damodaran Damodaran, Aswath 335

35 Introduction 337

36 Overview of Valuation 339

37 Discounted Cash Flow Valuation 341

38 Liquidation and Accounting Valuation 355

39 Relative Valuation 361

40 Real Option Valuation 369

41 Closing Thoughts on Value Enhancement 375

Pt. VIII Final Thoughts on Valuation Armin Varmaz Varmaz, Armin Thorsten Poddig Poddig, Thorsten Jan Viebig Viebig, Jan 379

42 Introduction 381

43 Valuation in Theory: The Valuation of a Single Asset 383

44 Outlook: The Multi-asset Valuation and Allocation Case 395

45 Summary 399

Index 403