LecLure 1 (ChapLers 6 & 9) !ared SLaneld March 3, 2014 ChapLer CuLllne 1. 8ond valuauon: 8efresher 2. SLock valuauon: ulvldend ulscounL 3. SLock valuauon: ayouL Model, lCl Model 4. SLock valuauon: Comparables !"#$ &'()'*+"# A refresher uenluons MaLurlLy: llnal 8epaymenL uaLe 1erm: 1lme remalnlng unul repaymenL Coupon: romlsed lnLeresL paymenLs lace value: nouonal amounL used Lo compuLe lnLeresL aymenLs Coupon 8aLe: ueLermlnes Lhe amounL of each coupon paymenL, expressed as an A8 Coupon Rate Face Value
Number of Coupon Payments per Year ! = CPN Zero Coupon 8ond valuauon Zero Coupon: Lasy-easy CapLaln Cbvlous would llke Lo remlnd you LhaL zero coupon bonds don'L have any coupons Lxample: u.S. 1-8llls (<1 year) Pow do we value? Slmple v formula:
(1 ) = + n n FV P YTM Coupon 8ond valuauon 1hese bonds have coupons!" yells CapLaln Cbvlous Lxample: CorporaLe, uS noLes and 8onds (>1 year), AusLrallan 8onds Pow do we value? 1 1 1 (1 ) (1 ) ! " = # $ + % & + + ' ( N N FV P CPN y y y 1akeaways 8oLh of Lhese bond Lypes are sLandard plug- n-chug" lf you have Lhe necessary lnpuLs. l'll asslgn some problems lf anyone needs a refresher on calculaung elLher of Lhese. LeL's move on Lo some non-Lrlvlal uses of Lhese models Solvlng for ?leld Lo MaLurlLy Solvlng for ?1M of a zero coupon ls sLralghuorward Solvlng for ?1M of a coupon bond? noL so much. Clven Lhere ls no closed-form" soluuon, we use compuLers or calculaLors Lo calculaLe Lhls. 1 1 ! " = # $ % & ' n n FV YTM P
(1 ) = + n n FV P YTM 1 1 1 (1 ) (1 ) ! " = # $ + % & + + ' ( N N FV P CPN y y y ?1M lmporLanL Lhlng Lo remember: ?1M ls lmplled by bond prlces and noL Lhe oLher way around So where do we geL bond prlces? 1erm SLrucLure of lnLeresL 8aLes racucally, lnvesLors have expecLauons abouL fuLure lnLeresL raLes, Lhese are facLored ln Lo bond prlclng. An easy way Lo geL Lhe Lerm-sLrucLure ls Lhrough zero-coupons Calculaung Lhe 1erm SLrucLure 1he followlng are prlces (per $100 lace value) of uS Zero- Coupon 8onds: uslng: We can Lhen use Lhese raLes Lo value a Lhree-year coupon bond. 1hls ls where prlces come from, we calculaLe ?1M aer we have Lhe prlce MaLurlLy 1 year 2 year 3 year rlce $98.04 $93.18 $91.31 1 1 ! " = # $ % & ' n n FV YTM P lmplled 8aLe 2 2.3 3 llnal 8ond 1houghLs We generally Lhlnk of uS Cov bonds as rlsk-free" 8lsk of defaulL ls very low lncorporaLe credlL rlsk Lhrough ylelds, keep cash ows as promlsed 1he longer amounL of ume unul Lhe bond's maLurlLy (longer durauon"), Lhe hlgher Lhe bond's lnLeresL raLe rlsk. 1he shorLer, Lhe hlgher Lhe bond's renanclng rlsk ,*"-. &'()'*+"# ulvldend ulscounL Model ulvldend ulscounL 1he prlce of any securlLy ls equal Lo Lhe presenL value of Lhe expecLed fuLure cash-ows lL wlll pay. WhaL are Lhe cash ows of a sLock? ulvldends, so applylng Lhe above 1he prlce of any sLock ls equal Lo Lhe presenL value of Lhe expecLed fuLure dlvldends lL wlll pay. WhaL abouL a sLock LhaL currenLly doesn'L pay a dlvldend? WhaL abouL a sLock LhaL wlll never pay money Lo shareholders? 3 1 2 0 2 3 1 E E E E
1 (1 ) (1 ) (1 ) ! = = + + + = + + + + " ! n n n Div Div Div Div P r r r r ConsLanL ulvldend CrowLh Model (or CuCM Lo lLs frlends) g" ls Lhe consLanL growLh raLe nouce LhaL Lhe prlce equauon ls a growlng perpeLulLy". ?ou'll wanL Lo become frlends wlLh Lhls one. 1he value of Lhe rm depends on Lhe dlvldend nexL year, Lhe cosL of equlLy, and Lhe growLh raLe. 1 0 E
= ! Div P r g CuCM roblem A1&1 plans Lo pay $1.44 per share ln dlvldends ln Lhe comlng year. lLs equlLy cosL of caplLal ls 8 and dlvldends are expecLed Lo grow by 4 per year ln Lhe fuLure
WhaL ls Lhe value of A1&1's sLock? WhaL ls Lhe value of A1&1's sLock lf Lhey lnsLead declded Lo delay Lhe rsL dlvldend unul 2 years from now (assumlng Lhe growLh and lnlual dlvldend amounL remaln Lhe same)? Soluuons 1.
2. 1 0 E $1.44 $36.00 .08 .04 = = = ! ! Div P r g P 1 = Div 2
r E ! g = $1.44 .08 !.04 = $36.00 P 0 = P 1 1+ r E = $36.00 1.08 = $33.33 CrowLh lf reLenuon raLe ls consLanL Lhan earnlngs growLh equals dlvldend growLh Change in Earnings New Investment Return on New Investment = ! New Investment Earnings Retention Rate = ! Change in Earnings Earnings Growth Rate Earnings Retention Rate Return on New Investment = = ! Retention Rate Return on New Investment = ! g WhaL lf growLh ls non-consLanL? 1he CuCM only works lf Lhe growLh raLe ls consLanL. lor a blg chunk of rms, Lhls ls noL Lhe case (younger, hlgh growLh rms) WhaL do we do? We can model Lhe non-consLanL poruon of Lhe growLh dlrecLly, Lhen use Lhe growlng perpeLulLy once Lhe growLh levels ouL non-consLanL ulvldend CrowLh ulvldend-ulscounL Model wlLh ConsLanL Long- 1erm CrowLh (see example 9.3 ln Lhe LexL) 1 E
+ = ! N N Div P r g 1 1 2 0 2 E E E E E 1
1 (1 ) (1 ) (1 ) + ! " = + + + + # $ + + + + % & ' ! N N N N Div Div Div Div P r r r r r g LlmlLauons of Lhe ulvldend-ulscounL Model very large uncerLalnLy assoclaLed wlLh forecasung a rm's fuLure dlvldends and dlvldend growLh raLe. Who knew Apple would sLarL paylng dlvldends Lwo years ago? Small changes ln Lhe assumed dlvldend growLh raLe can lead Lo blg changes ln Lhe esumaLed sLock prlce. ,*"-. &'()'*+"# ayouL and lree Cash llow Models 1oLal ayouL Model More rms are reLurnlng money Lo shareholders Lhrough repurchases. lL makes sense Lo Lake Lhls lnLo accounL: 1oLal ayouL Model values all of Lhe rms equlLy, raLher Lhan a slngle share. ?ou dlscounL LoLal dlvldends and share repurchases and use Lhe growLh raLe of earnlngs (raLher Lhan earnlngs per share) when forecasung Lhe growLh of Lhe rms LoLal payouLs. 0 0 (Future Total Dividends and Repurchases)
Shares Outstanding = PV PV 1he ulscounLed lree Cash llow Model 1he ulscounLed lree Cash llow Model focuses on Lhe cash ows Lo all of Lhe rms lnvesLors, boLh debL and equlLy holders. Why mlghL valulng Lhe enLerprlse of Lhe rm be beneclal? Enterprise Value Market Value of Equity Debt Cash = + ! 1he ulscounLed lree Cash llow Model valulng Lhe LnLerprlse 1o esumaLe a rms enLerprlse value, we compuLe Lhe presenL value of Lhe rms free cash ow avallable Lo pay all lnvesLors (boLh debL and equlLy). FreeCash Flow (1 Tax Rate) Depreciation Capital Expenditures Increasesin Net WorkingCapital EBIT = ! " + " " 1he ulscounLed lree Cash llow Model ulscounLed lree Cash llow Model Clven Lhe enLerprlse value, Lhe value of equlLy and dlvlde by Lhe LoLal number of shares ouLsLandlng. 0 0 0 0 V Cash Debt P SharesOutstanding + ! = 0 (Future Free Cash Flow of Firm) = V PV 1he ulscounLed lree Cash llow Model lmplemenung Lhe Model Slnce we are dlscounung Lhe cash ows Lo all lnvesLors, we use Lhe welghLed average cosL of caplLal (WACC), denoLed by r wacc lorecasL free cash ow up Lo some horlzon, LogeLher wlLh a Lermlnal value of Lhe enLerprlse: 1 2 N N 0 2 N N V V ... 1 (1 ) (1 ) (1 ) wacc wacc wacc wacc FCF FCF FCF r r r r = + + + + + + + + 1he ulscounLed lree Cash llow Model LsumaLe Lhe Lermlnal value by assumlng a consLanL long-run growLh raLe g lCl for free cash ows beyond year n. 1he long-run growLh raLe g lCl ls Lyplcally based on expecLed long-run growLh raLe of revenues N 1 N FCF 1 V FCF N wacc FCF wacc FCF g FCF r g r g + ! " + = = # $ % & & ' ( valulng nlke, lnc., SLock uslng lree Cash llow ?ou're a blg fan of MesuL Czll, Lhe 1urklsh-born playmaker LhaL plles hls Lrade for Arsenal. ?ou [usL found ouL LhaL he slgned wlLh nlke and wanL Lo supporL Lhe company by purchaslng some of Lhelr sLock. Slnce you had a chance Lo Lake llnS3623, you gure lL mlghL be fun Lo do a uCl calculauon Lo gure ouL how much you would be wllllng Lo buy a share of nlke sLock for. valulng nlke, lnc., SLock uslng lree Cash llow nlke had sales of $19.2 bllllon ln 2013 and you expecL lLs sales Lo grow aL a raLe of 8 ln 2014, buL Lhen slow by 1 per year Lo Lhe long-run growLh raLe LhaL ls characLerlsuc of Lhe apparel lndusLry-3-by 2017. 8ased on nlkes pasL proLablllLy an lnvesLmenL needs, you expecL: L8l1 Lo be 9 of sales, lncreases ln neL worklng caplLal requlremenLs Lo be 10 of any lncrease ln sales caplLal expendlLures Lo equal depreclauon expenses. lf nlke has: $2.3 bllllon ln cash, $32 mllllon ln debL, 486 mllllon shares ouLsLandlng a Lax raLe of 24 a welghLed average cosL of caplLal of 10 WhaL ls your esumaLe of Lhe value of nlkes sLock ln early 2014? uslng lree Cash llow 1he spreadsheeL below presenLs a slmplled pro forma for nlke based on Lhe lnformauon we have: ?ear 2013 2014 2013 2016 2017 /-/ /0123456 78 9:;;:0<= Sales 19,200.0 20,736.0 22,187.3 23,318.8 24,694.7 !"#$%& ()"*+* ,"-#" .)/" 8.0 7.0 6.0 3.0 >!+* 7?@ 0A 54;25= 1,866.2 1,996.9 2,116.7 2,222.3 Less: lncome 1ax (24) 447.9 479.3 308.0 333.4 lus: uepreclauon - - - - Less: CaplLal LxpendlLures - - - - Less: lncrease ln nWC (10 of Asales) 133.6 143.2 133.1 117.6 /122 -45B /;0C 1,264.7 1,372.3 1,473.6 1,371.3 valulng nlke, lnc., SLock uslng lree Cash llow 8ecause caplLal expendlLures are expecLed Lo equal depreclauon, Lhese llnes ln Lhe spreadsheeL cancel ouL. We can seL Lhem boLh Lo zero raLher Lhan expllclLly forecasL Lhem. Clven our assumpuon of consLanL 3 growLh ln free cash ows aer 2016 and a welghLed average cosL of caplLal of 10, we can compuLe a Lermlnal enLerprlse value: V 2016 = FCF 2017 r wacc ! g FCF ! " # $ % & = 1,571.5 0.10'0.05 ! " # $ % & = $31, 430million valulng nlke, lnc., SLock uslng lree Cash llow nlkes currenL enLerprlse value ls Lhe presenL value of lLs free cash ows plus Lhe rms Lermlnal value: Lsumaung nlke's sLock value: V 0 = 1, 264.7 1.10 + 1,372.5 1.10 2 + 1, 475.6 1.10 3 + 31, 430 1.10 3 = $27,006million P 0 = 27,006+2,300!32 486 = $60.23 valulng nlke, lnc., SLock uslng lree Cash llow 1he LoLal value of all of Lhe clalms, boLh debL and equlLy, on Lhe rm musL equal Lhe LoLal presenL value of all cash ows generaLed by Lhe rm, ln addluon Lo any cash lL currenLly has. 1he LoLal presenL value of all cash ows Lo be generaLed by nlke ls 27,006 mllllon and lL has 2,300 mllllon ln cash. SubLracung o Lhe value of Lhe debL clalms (32 mllllon), leaves us wlLh Lhe LoLal value of Lhe equlLy clalms and dlvldlng by Lhe number of shares produces Lhe value per share. 1he ulscounLed lree Cash llow Model Connecuon Lo CaplLal 8udgeung lree cash ow ls Lhe sum of Lhe free cash ows from Lhe rms currenL and fuLure lnvesLmenLs, so enLerprlse value ls Lhe sum of Lhe presenL value of exlsung pro[ecLs and Lhe nv of fuLure new ones. nv of any lnvesLmenL represenLs lLs conLrlbuuon Lo Lhe rms enLerprlse value. 1o maxlmlze share prlce, we should accepL pro[ecLs LhaL have a posluve nv. 1he ulscounLed lree Cash llow Model We musL forecasL all Lhe lnpuLs Lo free cash ow. 1hls process glves us exlblllLy Lo lncorporaLe many deLalls Powever, some uncerLalnLy surrounds each assumpuon Clven Lhls facL, sensluvlLy analysls ls lmporLanL 1ranslaLes Lhe uncerLalnLy lnLo a range of values for Lhe sLock. SensluvlLy Analysls for SLock valuauon nlkes L8l1 was assumed Lo be 9 of sales. lf nlke managemenL belleves Lhere ls a chance LhaL operaung expenses wlll lncrease because ln Lhe exclLemenL of slgnlng Czll, everyone forgeLs Lo do acLual work, whlch would cause L8l1 Lo be 8 of sales. Pow would Lhe esumaLe of Lhe sLocks value change? SensluvlLy Analysls for SLock valuauon ln Lhls scenarlo, L8l1 wlll decrease by 1 of sales compared Lo Lhe prevlous example. lnsLead of re-calculaung lCls we can slmply calculaLe Lhe change ln lCl. We can use Lhe Lax raLe (24) Lo compuLe Lhe eecL on Lhe free cash ow for each year. Cnce we have Lhe new free cash ows, we repeaL Lhe approach ln Lhe prevlous example Lo arrlve aL a new sLock prlce. SensluvlLy Analysls for SLock valuauon ln year 2014, L8l1 wlll be 1 x $20,736.0 mllllon = $207.4 mllllon lower. Aer Laxes, Lhls decllne wlll decrease Lhe rms free cash ow ln year 1 by (1-0.24) x $207.4 mllllon = $137.6 mllllon, Lo $1,107.1 mllllon. uolng Lhe same calculauon for each year, we geL Lhe followlng revlsed lCl esumaLes: Year 2014 2015 2016 2017 FCF 1,107.1 1,203.9 1,296.8 1,383.8 SensluvlLy Analysls for SLock valuauon We can now reesumaLe Lhe sLock prlce as ln Lhe prevlous example.
1hls ls a dlerence of abouL -11 compared Lo Lhe resulL found ln Lhe prevlous example V 0 = 1,107.1 1.10 + 1, 203.8 1.10 2 + 1, 296.8 1.10 3 + 27,676 1.10 3 = $23,769million V 2016 = FCF 2017 r wacc ! g FCF ! " # $ % & = 1,383.8 0.10'0.05 ! " # $ % & = $27,676million P 0 = 23,769+2,300!32 486 = $53.57 A Comparlson of ulscounLed Cash llow Models of SLock valuauon ,*"-. &'()'*+"# Comparables valuauon 8ased on Comparable llrms AnoLher appllcauon of Lhe valuauon prlnclple ls Lhe meLhod of comparables (comps). LsumaLe Lhe value of Lhe rm based on Lhe value of oLher, comparable rms or lnvesLmenLs LhaL we expecL wlll generaLe very slmllar cash ows ln Lhe fuLure. valuauon 8ased on Comparable llrms Conslder Lhe case of a new rm LhaL ls ldenucal Lo an exlsung publlcly Lraded rm. 1he valuauon rlnclple lmplles LhaL Lwo securlues wlLh ldenucal cash ows musL have Lhe same prlce. lf Lhese rms wlll generaLe ldenucal cash ows, we can use Lhe markeL value of Lhe exlsung company Lo deLermlne Lhe value of Lhe new rm. We can ad[usL for scale dlerences uslng valuauon muluples. valuauon 8ased on Comparable llrms valuauon Muluples A rauo of a rms value Lo some measure of Lhe rms scale or cash ow. rlce-Larnlngs rauo LnLerprlse value Muluples CLher muluples Muluples of sales rlce-Lo-book value of equlLy lndusLry- speclc rauos valuauon 8ased on Comparable llrms rlce-Larnlngs 8auo MosL common valuauon muluple usually lncluded ln baslc sLausucs compuLed for a sLock Share prlce dlvlded by earnlngs per share SLock rlce CuoLe for nlke (nkL) valuauon uslng Lhe rlce-Larnlngs 8auo Suppose l8M has earnlngs per share of $13.17. Suppose Lhe average /L of comparable compuLer hardware sLocks ls 23.2, LsumaLe a value for l8Ms sLock uslng Lhe /L as a valuauon muluple. WhaL are Lhe assumpuons underlylng Lhls esumaLe? valuauon uslng Lhe rlce-Larnlngs 8auo We can esumaLe a share prlce for l8M by muluplylng lLs LS by Lhe /L of comparable rms:
EPS!P / E = Earnings per Share !(Price per Share Earnings per Share) =Price per share valuauon uslng Lhe rlce-Larnlngs 8auo
0 =$13.17 23.2 = $303.34. 1hls esumaLe assumes LhaL l8M wlll have slmllar fuLure rlsk, payouL raLes, and growLh raLes Lo comparable rms ln Lhe lndusLry. AlLhough valuauon muluples are slmple Lo use, Lhey rely on some very sLrong assumpuons abouL Lhe slmllarlLy of Lhe comparable rms Lo Lhe rm you are valulng. lLs lmporLanL Lo see how well Lhese work ouL on a case-by- case basls valuauon 8ased on Comparable llrms We can compuLe a rms /L rauo uslng: 1ralllng earnlngs lorward earnlngs 1he resulung rauo ls elLher: 1ralllng /L lorward /L lor valuauon purposes, Lhe forward /L ls generally preferred, as we are mosL concerned abouL fuLure earnlngs. Why? valuauon 8ased on Comparable llrms /L rauos are relaLed Lo oLher valuauon Lechnlques. ln Lhe case of consLanL dlvldend growLh we had
ulvldlng Lhrough by LS 1 : 1 0 E Div P r - g = 0 1 E E / DividendPayout Rate ForwardP / E 1 1 P Div EPS EPS r - g r - g = = = 8elaung Lhe /L 8auo Lo LxpecLed luLure CrowLh CrowLh rospecLs and Lhe rlce- Larnlngs 8auo Apple and Mlcroso are boLh soware (and hardware) compeuLors. As of March 2012, Apple had a prlce of $343.18 and forward earnlngs per share of $33.11. Mlcroso had a prlce of $32.08 and forward earnlngs of $2.76 per share. CalculaLe Lhelr forward /L rauos and explaln Lhe dlerence. CrowLh rospecLs and Lhe rlce- Larnlngs 8auo lorward /L for Apple = $343.18/$33.11 = 13.33 lorward /L for Mlcroso's = $32.08/$2.76 = 11.62 ln March 2012, Apple's /L rauo was hlgher because lnvesLors expecL lLs earnlngs Lo grow more Lhan Mlcroso's. CrowLh rospecLs and Lhe rlce- Larnlngs 8auo AlLhough boLh companles are reLallers, Lhey had very dlerenL growLh prospecLs, as reecLed ln Lhelr /L rauos. lnvesLors ln Apple were wllllng Lo pay 13 umes Lhls years expecLed earnlngs because Lhey are also buylng Lhe presenL value of hlgh fuLure earnlngs creaLed by expecLed growLh. Apples currenL (as of a couple days ago) lorward /L ls 11.19 whlle Mlcroso's ls 12.88. WhaL does Lhls mean ln Lerms of Lhe growLh prospecLs of boLh companles? valuauon 8ased on Comparable llrms LnLerprlse value Muluples /L rauo relaLes excluslvely Lo equlLy, lgnorlng Lhe eecL of debL. WhaL does Lhls mean you are eecuvely assumlng? LnLerprlse value muluples use a measure of earnlngs before lnLeresL paymenLs are made L8l1 L8l1uA lree cash ow 8ecause caplLal expendlLures can vary beLween years, lLs mosL common ls Lo use enLerprlse value Lo L8l1uA muluples valuauon 8ased on Comparable llrms When expecLed free cash ow growLh ls consLanL, we can wrlLe Lv Lo L8l1uA as: 1 0 1 1 / 1 1 wacc FCF wacc FCF FCF V FCF EBITDA r g EBITDA EBITDA r g ! = = ! valuauon uslng Lhe LnLerprlse value Muluple Cu8 lndusLrles ls a manufacLurer and dlsLrlbuLer of nlLrogen and phosphaLe ferullzer producLs. lL has an L8l1uA of $2,893 mllllon, cash of $1,207 mllllon, debL of $1,617 mllllon, and 63 mllllon shares ouLsLandlng. 1he ferullzer lndusLry as a whole has an average Lv/L8l1uA rauo of 4.8. WhaL ls one esumaLe of Cu8's enLerprlse value? WhaL ls a correspondlng esumaLe of lLs sLock prlce? valuauon uslng Lhe LnLerprlse value Muluple Cu8's enLerprlse value ls $2,893 mllllon 4.8 = $13,896 mllllon nexL, subLracL Lhe debL from lLs enLerprlse value and add ln lLs cash: $13,896 mllllon - $1,617 mllllon + $1,207 mllllon = $13,486 mllllon, whlch ls Lhe equlLy value. lLs sLock prlce ls equal Lo lLs equlLy value dlvlded by Lhe number of shares ouLsLandlng: $13,486 mllllon - 63 mllllon = $207.48 valuauon uslng Lhe LnLerprlse value Muluple lf we assume LhaL Cu8 lndusLrles should be valued slmllarly Lo Lhe resL of Lhe lndusLry, Lhen $207.48 ls a reasonable esumaLe of lLs sLock prlce. Powever, we are relylng on Lhe assumpuon LhaL Cu8 lndusLrles' expecLed free cash ow growLh ls slmllar Lo Lhe lndusLry average. lf LhaL assumpuon ls wrong, so ls our valuauon. valuauon 8ased on Comparable llrms CLher muluples Muluples of sales can be useful lf lL ls reasonable Lo assume marglns are slmllar ln Lhe fuLure. rlce-Lo-book value of equlLy can be used for rms wlLh subsLanual Langlble asseLs. Some muluples are speclc Lo an lndusLry e.g. Cable 1v LnLerprlse value per subscrlber valuauon 8ased on Comparable llrms LlmlLauons of Muluples llrms are noL ldenucal usefulness of a valuauon muluple wlll depend on Lhe naLure of Lhe dlerences and Lhe sensluvlLy of Lhe muluples Lo Lhe dlerences. ulerences ln muluples can be relaLed Lo dlerences ln LxpecLed fuLure growLh raLe 8lsk (cosL of caplLal) ulerences ln accounung convenuons beLween counLrles valuauon 8ased on Comparable llrms LlmlLauons of Muluples Comparables provlde only lnformauon regardlng Lhe value of Lhe rm relauve Lo oLher rms ln Lhe comparlson seL CannoL help deLermlne wheLher an enure lndusLry ls overvalued. lnLerneL boom example valuauon 8ased on Comparable llrms Comparlson wlLh ulscounLed Cash llow MeLhods valuauon muluple does noL Lake lnLo accounL maLerlal dlerences beLween rms. 1alenLed managers More eclenL manufacLurlng processes aLenLs on new Lechnology valuauon 8ased on Comparable llrms Comparlson wlLh ulscounLed Cash llow MeLhods ulscounLed cash ow meLhods allow us Lo lncorporaLe speclc lnformauon abouL cosL of caplLal or fuLure growLh oLenual Lo be more accuraLe valuauon 8ased on Comparable llrms SLock valuauon 1echnlques: 1he llnal Word no slngle Lechnlque provldes a nal answer regardlng a sLocks Lrue value racuuoners use a comblnauon of Lhese approaches Condence comes from conslsLenL resulLs from a varleLy of Lhese meLhods Lxample of oLenual 8ange of valuauons for nlke SLock uslng varlous valuauon MeLhods nexL 1lme Pomework: ChapLer 6: 23, also browse Lhrough Lhe earller problems (1-7) and see lf you need a refresher. ChapLer 9: 6-8, 11-12, 13-16, 19, 21, 27-28 8evlew ChapLer 2 (lf you undersLand Lhe rauos you can sklm lL) 8ead ChapLer 19, Secuons 1-3, and Lhe Conunuauon value" poruons of Secuon 3