Financial valuation and modelling

Table of content:
Preface

About the Author

Acknowledgments


Chapter 1 The Valuation Business

1.1 Introduction

1.2 Valuation Approach

1.3 Valuation Spectrum

1.4 Asian Economies and Shareholder Return

1.5 Valuation and Share Price


Chapter 2 Business Valuation

2.1 Introduction

2.2 The Historical Cost Approach

2.3 The Residual Income Approach

2.4 The Multiples Approach

2.5 The Dividend Discount Model

2.6 The Discounted Cash Flow Approach

2.7 Economic Value Added


Chapter 3 Understanding DCF Valuation

3.1 Introduction

3.2 Components of DCF

3.3 Valuing Firm with DCF

3.4 Unlevering Beta and Firm Valuation


Chapter 4 Cost of Capital

4.1 Introduction

4.2 Defining Cost of Capital

4.3 Opportunity Cost of Capital

4.4 Mode of Financing

4.5 Sources of Funds

4.6 Cost of Debt

4.7 Cost of Debt and Tax Advantage

4.8 Determining Cost of Debt

4.9 Synthetic Credit Rating

4.10 Cost of Equity ke

4.11 Weighted Average Cost of Capital


Chapter 5 Undervaluation and Financial Distress

5.1 Introduction

5.2 Trading and Earnings Multiples and Undervaluation

5.3 Enterprise Value Multiples

5.4 EV/Sales

5.5 EV/EBITDA

5.6 Financial Distress and Undervaluation

5.7 Managing Financial Distress


Chapter 6 Relative Valuation

6.1 Introduction

6.2 Steps in Comparable Analysis

6.3 Equity Value

6.4 Enterprise Value

6.5 EBITDA

6.6 Gross Profit Margin

6.7 Growth Metric

6.8 Credit Profile

6.9 Precedent Transaction Analysis


Chapter 7 Start-Up Valuation

7.1 Introduction

7.2 Convertible Debt for Start-Ups

7.3 Equity Series Round

7.4 Pre- and Post-Money Valuations

7.5 Future Dilution

7.6 Option Pool

7.7 Preferred Stock and Liquidation Preference


Chapter 8 Private Equity and Valuation

8.1 Introduction

8.2 Functions of a PE Firm

8.3 Structure of a PE Firm

8.4 Private Equity and Hedge Funds

8.5 PE Investment Strategy

8.6 Types of Private Funds

8.7 Regulation of PE Market

8.8 Factors Responsible for Private Equity Growth

8.9 PE in India


Chapter 9 M&A Valuation and Merger Modelling

9.1 Introduction

9.2 Purchase Price and Stock Payment

9.3 Pro Forma Balance Sheet

9.4 Valuation of Target with Multiples


Chapter 10 LBO Economics

10.1 Introduction

10.2 LBO Sponsors

10.3 LBO Mode of Target Acquisition

10.4 Criteria for Selecting LBO Candidates

10.5 LBO Capital Structure

10.6 Concept of Financial Leverage and Risk

10.7 History of LBOs

10.8 Role of Private Equity Investors

10.9 Theories of LBOs

10.10 Exit Strategies for LBO

10.11 LBOs in India


Chapter 11 LBO Valuation and Modelling

11.1 Introduction

11.2 LBO Economics

11.3 LBO Valuation


Chapter 12 Real-Option Valuation

12.1 Introduction

12.2 DCF and Real Options

12.3 Option Basics

12.4 Real-Option Binomial Model Approach

12.5 Real Option with the Black–Scholes Model

12.6 The Black–Scholes Equation

12.7 Categories of Real-Option Opportunities

12.8 Conclusion


Chapter 13 Brand Valuation

13.1 Introduction

13.2 M&A and Brand Valuation

13.3 Brand Valuation Methods

13.4 IFRS and Brand Valuation

13.5 Intangible Assets

13.6 Value Drivers for Valuation


Chapter 14 Hedge Funds

14.1 Introduction

14.2 Hedge Funds and M&A

14.3 Characteristic Features of Hedge Funds

14.4 Growth of Hedge Funds

14.5 Hedge Fund Indices and Databases

14.6 Types of Hedge Fund Investors

14.7 Hedge Fund Investment Strategies


Chapter 15 Investment Banks

15.1 Introduction

15.2 Investment Bank Structure

15.3 Investment Bank Functions

15.4 Investment Bank Fee

15.5 Regulation of Investment Banks

15.6 Investment Banks in India


Chapter 16 Intellectual Property Rights and Patent Valuation

16.1 Introduction

16.2 Categories of Intangible Assets

16.3 India and Trips

16.4 Indian IPR Regulations

16.5 Patent Law in India

16.6 Accounting for Intangible Assets

16.7 IFRS 3 and Intangible Assets

16.8 Valuation of Intangible Assets

16.9 Valuation Methods

16.10 IPR and Patent as Financial Asset

16.11 IPR and Patent Taxation


Index
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Post-Covid 2019, the business world has entered a fast-forward era of disruption, digitization, realignment of value chain activities, and innovation. Valuation has become an integral part in every sphere of day-to-day business activities. Financial Valuation and Modeling is a comprehensive guide to valuation concepts, application, valuation models, and investment banking. This book also covers emerging concepts and approaches for patent & IPR valuation, brands, startup valuation, real-options valuations, M&A valuation, merger modeling, relative valuation, LBO valuation and modeling, and undervaluation and financial distress. This book uses valuation methods that are currently used by valuators across the globe, Wall Street, and Dalal Street. With each method and concept, it builds a chronological knowledge base and understanding, defining key terms, financial concepts, valuation methods, various approaches, and modeling processes throughout the book.


The book takes the readers through the various underlying concepts, methodologies, Excel-based valuation models, and simulation models to better understand the valuation concepts. The book contains tables, graphs, illustrations, real business cases, and Excel models to understand valuation across assets and investment decisions. With simple and lucid language and excellent presentation, this book would be immensely useful for MBA (Finance) students, chartered accountants, company secretaries, lawyers, and management professionals as it provides deep understanding of valuation and valuation models.


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