Valuation

Online Course
9/3/2017 - 12/15/2017

Professor: Aswath Damodaran

Email: adamodar@stern.nyu.edu
Office Hours: By appointment
Website: http://www.damodaran.com

Teaching Fellow: Michael Mangia

Email: mm7233@stern.nyu.edu
Office Hours: By appointment

Course Moderator: Shashank Gupta

Email: ShashankGupta22@gmail.com
Office Hours: By appointment

Pre-course Prep

Primers: Before starting the course, you may find these primers helpful.
a. Accounting: The raw material you need to value a company comes primarily from accounting
statements. Understanding how to read a financial statement and where to find the needed
information is critical.

b. Statistics: Statistics is designed to help us make sense of data that is large and contradictory.
That is exactly the problem we face in valuation.

c. Finance: These are the tools that we draw on extensively in valuation.

i. Risk and Return Models
ii. Present Value
iii. Corporate finance

Course Overview

Whether its managing a portfolio, preparing for an imminent merger or acquisition, or marveling over
the newest dollar figure attached to a tech wunderkind, valuation is the key to parsing and
understanding the numbers. Valuation is not a science, but its also not an art, and different analysts
will use different models, further colored by their own experiences. Learn valuation for what it is a
craft and how to understand and apply the core fundamentals that drive each approach. W atch the
introduction video on the Getting Started tab to hear more about the themes that animate this course.

Valuation, Professor Aswath Damodaran Page 1

Course Objectives

By the end of this class, you should be able to estimate the value of any business, small or large,
private or public, in a developed or an emerging market. You should also be able to price any business,
using earnings, book value, revenue, or other pricing multiple and comparables. In more general terms,
if you are a storyteller, I hope that this class gives you enough confidence with numbers to make you
disciplined. Alternatively, if you are a number cruncher, I would like to see you develop the storytelling
skills you need to complement your numbers skills.

Course Format & Structure

This is an online asynchronous course with a few optional synchronous sessions. The course consists
of 28 online sessions, designed to capture what I do in my semester-long in-person valuation class and
to be the basis for a Stern Valuation Certificate.

Students are encouraged to complete two sessions per week (as noted in the Course Schedule).
However, since this is an online course, students will have some flexibility around how they progress
through the material. Sessions will be released at least 1 week prior to their suggested completion date
and will remain open throughout the course. Thus, students can work on sessions before or after the
suggested due date. Please check the Course Schedule for the dates for the WebEx virtual sessions,
quizzes, and the final exam. These dates are fixed and are not flexible.

Since there is a lot of material for each session, you may not be able to cover all of it. Thus, each
session is structured according to the following framework:

Required Activities include

Reviewing Slide Sets
Watching Video Modules
Completing Self-Assessments
Reviewing Readings
Completing Practice Problems

Recommended/Optional Activities could include resources such as:

Blogs
Application Webcasts
Datasets, Spreadsheets & Tools Self-Assessment

Required Cumulative Project

This will include a series of weekly activities and assignments that will result in a
complete Valuation project.

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Grading
Quizzes 30%

Quiz 1 10%

Quiz 2 10%

Quiz 3 10%

Final Exam 30%

Cumulative Project 40%

Valuation Project 30%

Pricing Exercise 10%

Quizzes and Exam

There are three quizzes, each worth 10%, and a Final Exam, worth 30%. Quizzes and exams are open
book, open notes. You can bring in as much supporting material as you can carry.

If you have to miss a quiz for good reason, you will have to let me know (by email) at least 15 minutes
before the quiz that you will be missing begins. If you miss a quiz for a good reason, the 10% weight
on that quiz will be reallocated across your remaining exams (quizzes and finals). W eight cannot be
distributed across quizzes already taken. If you take all three quizzes, the score on your worst quiz will
be pushed to the average score across all of your other exams (the other two quizzes and the final
exam). Note: it will NOT be thrown out. If you miss a quiz, you will not have this option, even if you
miss the quiz for good reason. You can never be worse off from taking all three quizzes. At worst, your
total score will be unaffected, but at best, it will improve.

Cumulative Project
This project is designed to apply the valuation techniques we learn in class to companies in the real
world. This is the crown jewel of the class, where in each session, you estimate the number or
numbers for a company of your choice, which you will continue to follow through the entire course. By
the end of the course, the cumulation of your numbers will allow you to value your company.

Course Resources
All students enrolled in the NYU Stern Certificate in Advanced Valuation will h
ave access to Capital IQ
for the duration of the Valuation Course. This resource will be especially helpful as you work through
your final valuation project.

In addition, you will be granted access to the supplemental course: Essentials of Financial Accounting
(EFA) with NYU Stern Professor Amal Shehata. The course will familiarize you with the vocabulary and
financial statement structure you will need to be successful in the Advanced Valuation course. We
encourage you to take the time to explore this additional offering and develop your knowledge of
financial accounting! Also, please note that is a supplemental course, meaning that it is a resource for
students, not a requirement. As such, the course work for EFA for will not impact your grade.

Reference Course Resources in the Getting Started section of the course site to learn about
accessing these supplemental materials and resources.

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 Course Schedule
Due Dates* Session Number and Title: Release Date
Bold Dates are fixed, others are suggested (on NYU Classes)

Prep S 9/3 Getting started - Intro S 8/28

W 9/6 S01: Valuation: The Big Picture
Week 1 T 9/5
F 9/8 S02: Intrinsic Value - Introduction
M 9/11 S03: The Risk Free Rate
Week 2 T 9/12 (12:00 - 1:00 PM ET) WebEx: Week 2 - Q&A about sessions 1-4 T 9/5
TH 9/14 S04: The Equity Risk Premium
M 9/18 S05: Relative Risk Measures
Week 3 M 9/11
TH 9/21 S06: The Costs of Debt & Capital
M 9/25 S07: Estimating Cash Flows
T 9/26 (12:00 - 1:00 PM ET) WebEx: Week 4 - Q&A about session 5-7 & Quiz 1 M 9/18
Week 4
TH 9/28 S08: Estimating Growth
F 9/29 QUIZ 1: COVERS SESSIONS 1-7 F 9/29
M 10/2 S09: Terminal Value
Week 5 M 9/25
Th 10/5 S10: Value Enhancement
M 10/9 S11: Loose Ends 1: From Asset Value to Equity Value
Week 6 TH 10/12 S12: Loose Ends 2: Acquisition Ornaments M 10/2
F 10/13 (12:00 - 1:00 PM ET) WebEx: Week 6 - Q&A about sessions 8-12
M 10/16 S13: Loose Ends 3: Dilution and Illiquidity
Week 7 M 10/9
TH 10/19 S14: Narrative to Numbers: Connecting Stories to Value
M 10/23 S15: The Pricing Imperative: Relative Valuation
T 10/24 (12:00 - 1:00 PM ET) WebEx: Week 8 - Q&A about sessions 13-15 & Quiz 2 M 10/16
Week 8
TH 10/26 S16: The Most Used Multiple: PE ratio
F 10/27 QUIZ 2: COVERS SESSIONS 8-14 F 10/27
M 10/30 S17: Other Earnings Multiples
Week 9 M 10/23
TH 11/2 S18: Book Value Multiples
M 11/6 S19: Revenue Multiples and Mopping up
Week 10 M 10/30
TH 11/9 S20: Asset Based Valuation
M 11/13 S21: Private Company Valuation
Week 11 M 11/6
TH 11/16 S22: The Essence of Real Options
M 11/20 S23: The Option to Delay
Week 12 T 11/21 (12:00 - 1:00 PM ET) WebEx: Week 12 -Q&A about sessions 16-23 M 11/13
TH 11/23 (Thanksgiving) S24: The Option to Expand & Abandon
M 11/27 S25: Valuing/Pricing Start-ups & Young Companies
M 11/20
TH 11/30 S26: Valuing/Pricing Declining & Distressed Companies
Week 13
TH 11/30 (12:00 - 1:00 PM ET) WebEx: Week 13 -Q&A about sessions 24-26 & Quiz 3
F 12/1 QUIZ 3: COVERS SESSIONS 15-21 F 12/1
M 12/4 S27: Valuing/Pricing Financial Service Companies
Week 14 T 12/5 (12:00 - 1:00 PM ET) WebEx: Week 14-Q&A about sessions 27- 29 & Quiz 3 M 11/27
TH12/7 S28: Valuing/Pricing Cyclical and Commodity Companies
Week 15 M 12/11 Valuation: Looking back and looking forward M 12/4
T 12/12 (12:00 - 1:00 PM ET) WebEx: Week 16 - Q&A about Final Exam T 12/12
Final Week W 12/13 FINAL EXAM: COMPREHENSIVE EXAM W 12/13
F 12/15 (12:00 - 1:00 PM ET) WebEx: Week 16 - Q&A about Final Project F 12/15
Final Project W 1/03 FINAL PROJECT DUE W 1/03

Valuation, Professor Aswath Damodaran Page 4

Recommended Materials (Not Required)

Books: I have a few books on valuation and they tend to say much of the same things, albeit in
different formats. You dont need any of them, but if you can get one, it wont hurt.
Investment Valuation (3rd edition): is the book that is most suited for a classroom. It follows the
standard script of valuation, looking at different valuation models with twists. It also follows
textbook format (with problems at the end of each chapter).
Damodaran on Valuation (2nd edition): provides a quicker review of basic valuation but the
second half of the book focuses on what I call the loose ends of valuation. It is really meant for
practitioners who deal with the loose ends on a constant basis.
The Dark Side of Valuation (2nd edition): covers companies that are difficult to value young
companies, money losing companies, financial service companies, emerging market
companies.
The Little Book of Valuation (1st Edition): If you truly, truly hate to read and are budget
constrained, think of this as the Cliff notes version of my longer books.
Narrative and Numbers (1st Edition): T his is for storytellers who want to develop some discipline
and number crunchers who want to be imaginative.

Apps: I have a valuation app (co-developed with Anant Sundaram at Dartmouth) for iPads and iPhones
called uValue. Check it out!
iPad version: https://itunes.apple.com/us/app/uvalue/id440046276
iPhone version: https://itunes.apple.com/us/app/uvalue-mobile/id492586911

Other Resources:

Website for the Class: Everything associated with this class (and I mean everything) will be available
on the website for the class. I will try to also keep the material on NYU Classes, but I dont like closed
systems. Enough said!
http://www.stern.nyu.edu/~adamodar/New_Home_Page/equity.html

Social Media Sites (My NYU Classes Alternative): I have been experimenting with new ways of
offering this class. This semester, I will find a new forum to present this class. I would love to get your
feedback on how it works. I will share it.

Apple iTunes U: The class will also be carried on Apple iTunes U.

If you have an Apple device (an iPhone or iPad), download the iTunes U app from the iTunes
store and then use the enroll code: FHS-KWW-FPK
Alternatively, type in or click on the link for the class.
https://itunes.apple.com/us/course/id1191852024
If you have an Android (what possessed you to commit such a mortal sin?), you can watch
iTunes U, if you have the Tunesviewer app on your Android. You can get it by going to
http://sourceforge.net/projects/tunesviewer/

YouTube Channel: There is a final option, if your broadband connection is not that great and/or you
are watching on a tablet/smartphone. There is a YouTube playlist for this class, where all class
sessions will be loaded. When you get a chance, check it out:
https://www.youtube.com/playlist?list=PLUkh9m2BorqkNzSSPrCDkO2jlufVCinVw

Valuation, Professor Aswath Damodaran Page 5

Course Policies:

Please be sure to review:

University Policies:
http://www.stern.nyu.edu/portal-partners/academic-affairs-advising/policies-procedures/default-p
olicies-stern-courses
Stern Code of Conduct:
http://www.stern.nyu.edu/sites/default/files/assets/documents/NYU_Stern_Code_of_Conduct%2
0Feb16.pdf

Any student attending NYU who needs an accommodation due to a chronic, psychological, visual,
oses Center
mobility, and/or learning disability, or is deaf or hard of hearing should register with the M
for Students with Disabilities at 212 998-4980 or mosescsd@nyu.edu. The Moses Center is located at
726 Broadway, 2nd floor.

Academic Integrity Statement:

Be sure to read the NYU Statement of Academic Integrity. It is available on NYU Classes for your
convenience. Academic integrity is the guiding principle for all that you do: from taking exams to
making oral presentations to writing term papers. It requires that you recognize and acknowledge
information derived from others, and take credit only for ideas and work that are yours. You violate the
principle of academic integrity when you:
Cheat on an exam;
Submit the same work for two or more different courses without the knowledge and the
permission of all professors involved;
Receive help on a take-home examination that calls for independent work;
Collaborate" with other students, who then submit the same paper under their individual
names;
Give permission to another student to use your work for a class;
Plagiarize.
Plagiarism, one of the gravest forms of academic dishonesty in university life, whether intended or not,
is academic fraud. In a community of scholars, whose members are teaching, learning, and discovering
knowledge, plagiarism cannot be tolerated. Plagiarism is failure to properly assign authorship to a
paper, a document, an oral presentation, a musical score, and/or other materials, which are not your
original work. You plagiarize when, without proper attribution, you do any of the following:
Copy verbatim from a book, an article, or other media;
Download documents from the Internet;
Purchase documents;
Report from others oral work;
Paraphrase or restate someone elses facts, analysis, and/or conclusions;
Copy directly from a classmate or allow a classmate to copy from you.

NYU Classes

NYU Classes is used extensively in the class for assignment submissions, communication, grade
tracking, and posting videos. Get familiar with our site and check it frequently.

Valuation, Professor Aswath Damodaran Page 6

Troubleshooting Tips
Problems with NYU Classes
For general issues with regards to NYU Classes and tools within NYU Classes (including the
Meetings tool):

If you experience any technical issues contact the IT Service Desk. For immediate
assistance, call 1-212-998-3333 to speak with IT Service Desk staff 24 hours a day, seven
days a week. (NYU-NY community members can simply call 8-3333 from on-campus
phones.) For help online, search the ServiceLink knowledge base, or submit your question
(including as many details as possible) using the contact form or by sending email to
AskIT@nyu.edu. A representative will respond to the email address you supply within one
business day. For in-person help in New York, visit the IT Service Desk at 10 Astor Place,
4th floor, from Monday to Friday, 9am to 6pm ET. For help with configuring your laptop
computer, however, call 1-212-998-3333 first to make an appointment.

Problems viewing video

If at any point, there are problems with video playback, you may want to do one of the following:
Refresh the course page
If it is a YouTube video, search for the video title on YouTube.com.
If the video is embedded on the page and does not come from YouTube, it is streaming from
NYUStream. Troubleshooting strategies for NYU Stream video playback:
Refresh the course page.
You must be logged into the NYU intranet to view the videos. If you are accessing
the videos remotely, you may have to sign into NYU Stream separately even though
you are already signed into NYU Classes. Go to stream.nyu.edu. If you are asked to
sign in, please sign in. Then go back to the lesson, refresh the page, and see if you
can play the video.

Problems with WebEx

WebEx is a web conferencing tool available in select course sites in NYU Classes. Please carefully
review this guide for students: http://www.nyu.edu/servicelink/KB0013588
Technical requirements:
Before using WebEx in NYU Classes, please review the following resource:
WebEx technical requirements: http://www.nyu.edu/servicelink/KB0013599
To prepare for a smooth experience with WebEx, please follow these guidelines:
Use a laptop or desktop computer with a built-in webcam.
Connect with an internet cable or strong & stable wireless [i.e., do not sit in a cafe].
Join the session 15 mins before the scheduled start time to get set up.
Use a wired headset.
**If you have any trouble with Audio during the WebEx session, please use your phone to dial-in.
**We recommend a tech check and a speed test at the start of the semester and prior to using
WebEx:
Click on this link to the WebEx site: http://www.webex.com/test-meeting.html
Click on this link for the speed test: http://www.speedtest.net/
You can also contact the NYU ITS Support Services Helpdesk 24/7 for ALL technical support:
Phone: (212) 998-3333
E-mail: askits@nyu.edu
Web: http://www.nyu.edu/its/
Web Ticket: https://www.nyu.edu/its/askits/contactus/

Valuation, Professor Aswath Damodaran Page 7