COURSE SUMMARY
The lectures on CORPORATE FINANCE & VALUATION will extend our theoretical framework and discussions of our first term lectures on VALUING SECURITIES.
The lectures will be this summer term every Monday from 8:00-11:20 am (class room # W1.03).
COURSE DESCRIPTION & METHODOLOGY
The understanding how companies create value, how they measure value creation and how they finance on equity and debt capital markets their investments to scale their business is the intellectual backbone of any market economy. This is also the essence of this lecture series. We will learn that companies create only value by investing capital they raise from investors on equity and debt capital markets to generate future cash flows at rates of return exceeding their specific risk adjusted cost of capital.
This is paramount to understand as equity capital markets, and here especially technology stocks, travelled fast north during in the 2020s to elevated level. So, what is the fair value bandwidth of such digital business designs and platform companies, like Google, Tesla, Uber, Airbnb or Netflix?
Additionally, we will discuss the distinct sources of financing for corporations which are on the one side internally-generated funds, like depreciation and retained earnings, and on the other side debt as well as equity as major sources of external funds. Start-ups use primarily venture capital, a special kind of risk-equity funding. Investment Banks support companies to place their securities on global debt (bond) or equity (IPO, shares) markets.
The theme here is that debt and equity comes in many forms. As in biodiversity the variety is the very spice of life. We will analyze the specifics of the capital structure theory by starting with the classical MODIGLIANI & MILLER Model and their IRRELEVANCY THEOREM for perfect capital markets and will extend this model by introducing market imperfections like taxes and costs of default.
LITERATURE & LECTURE MATERIAL
Lecture presentations will be released ahead of time. Lectures, articles and further readings as well as web references will be posted on Moodle.
As mandatory text books we will use:
- Damodaran, A. (2012). Investment Valuation – Tools and Techniques for Determing the Value of Any Asset. 3rd ed., New Jersey: Wiley & Sons.
- Feix, T. (2020). End-to-End M&A Process Design - Resilient Business Model Innovation. Wiesbaden: Springer Science.
- Feix, T. (2021). Valuing Digital Business Designs and Platform Companies - An Integrated Strategic and Financial Valuation Framework. Springer Science Global Book Series: The Future of Business & Science. Wiesbaden: Springer Science.
- Koller, T.; Goedhart, M.; Wessels, D. (2020). Valuation – Measuring and Managing the Value of Companies", 7th edition, 2020. NY: Wiley.
Additional text books, articles and web-literature will be used for specific lectures. You should also prepare yourself by regularly reading the Economist (weekly) and the Financial Times (daily).
COURSE REQUIREMENTS
Students are expected to carefully review the assigned reading materials before each session, diligently work on the assigned problems, questions, and cases, and to participate actively in the class discussions. You should be prepared to spend some time to digest the material, as well as to work on the assignments and case studies. Timely submission of the assigned work is critical. Late submissions will not be accepted.
TIMING & TOPICS
Our flow of topics will be:
- Introduction to Corporate Finance & Valuation: THE TAO OF VALUE
- Alternative Valuation Approaches
- Financial & Performance Diagnostics
- Linking Financial with Strategic Diagnostics
- Forecasting Performance and Cash Flows: Planning Period & Continuing Value
- Corporate Finance and Cost of Capital: Levered & Unlevered
- The Walk from Operating to Enterprise to Equity Value and Value per Share & Valuation Framing with Multiples
- Valuation Embedded in "Pictures of the Future"
- Dozent/in: Thorsten Feix