Multiples versus DCF analysis Multiples analysis is simple to understand and apply. The inputs for the multiple arepublicly available‚ though are vulnerable to accounting manipulation. Also‚ it isdifficult to obtain a truly comparable large sample of firms. Multiples analysis isbackward-looking‚ reliant on historical/current data to obtain multiples. It reflectsrelative value rather than the intrinsic value which DCF valuation produces.DCF analysis generates an intrinsic value as it relies on data
Premium Discounted cash flow Regression analysis Option
forward 1.3 The one-step binary model 1.4 A ternary model 1.5 A characterisation of no arbitrage 1.6 The risk-neutral probability measure Exercises Binomial trees and discrete parameter martingales Summary 2.1 The multiperiod binary model 2.2 American options 2.3 Discrete parameter martingales and Markov processes 2.4 Some important martingale theorems 2.5 The Binomial Representation Theorem 2.6 Overture to continuous models Exercises Brownian motion Summary 3.1 Definition of the process 3.2 L´ vy’s construction
Premium Call option Put option Option
Cuisines Employee stock options. The purpose of this paper is to Exotic Cuisines Employee stock options and make the decision that is going to be the most fiscally responsible in the long run. This decision will be achieved by answering the 6 questions at the end of the case study. Case Study 1. We can use the black-scholes equation to value the employee stock options .We need to use the risk free rate that is the same as the maturity as the options .so assuming expiration
Premium Stock market Option Call option
Thus‚ it would be as if the issuer sold bonds with the final principal payments at par but also bought a put option on the Nikkei maturing in the same year as the bond. If the Nikkei fell‚ the put would rise in value benefiting the issuer. This reflects the embedded nature of the put option. 3. The issuer had no interest in holding this put. It often resold the embedded put options to financial intermediaries like Goldman Sachs by promising to deliver‚ at maturity‚ the difference between the
Premium Option Put option Call option
Question 1 What are the tradeoffs in using Multiples versus DCF analysis? DCF Valuation 1. Forecast revenue for each year for from the firm’s financial data. 2. Select appropriate discount rate based on WACC 3. Discount each cashflow back to it present value 4. Obtain the terminal value through an application of terminal value multiple 5. You add these values together 6. Using this method‚ Martin calculates the price of Cox’s share to be $54.29 Multiple Valuation: 1. Identify comparable
Premium Discounted cash flow Option Fundamental analysis
A09-05-0018 Eskandar Tooma Aliaa I. Bassiouny Valuation of an Increased Capacity Project Using Real Option Analysis: The Case of Savola Sime Egypt “Our profits almost doubled last financial year; however‚ I don’t think we can expect the same increase this year‚” said Karim Reda‚ production manager for Savola Sime Egypt‚ in September 1997. “We simply don’t have the capacity to produce more.” He was speaking to Mohamed Sallam‚ CFO of Savola. Over the past month‚ Sallam’s office had witnessed extensive
Premium Corporate finance Net present value Cash flow
approximately 20.1%‚ from the year ended 31 March 2013 to 2014.DIRECTORS’ AND CHIEF EXECUTIVE’S REMUNERATION During the prior year‚ a director and the chief executive were granted share options‚ in respect of their services to the Group‚ under the Pre-IPO share option scheme of the Company. The fair value of these options‚ which has been recognized in the statement of profit or loss over the vesting period‚ was determined as at the date of grant and the amount included in the financial statements for
Premium Derivative Income statement Security
PERFORMANCE BASED COMPENSATION "" HOW IT CAN BE USED STRATEGICALLY IN TODAY’S COMPETITIVE WORKFORCE 1) Definition of Performance Based Compensation Performance based compensation can be defined as programs implemented for recognizing employees’ contributions. Different programs differ according to four different features‚ namely‚ the payment methods‚ the frequency of payout‚ ways of measuring performance and choice of which employees are covered. Performance based compensation is extremely important
Premium Motivation Employment compensation Option
variable for the real options model. The state variable is the average hypothetical net inflow of the sequel‚ discounted using a WACC of 12.36% back to 1989. Discounting back to 1989 is important because this is the time of the first film’s release. Within several weeks of release‚ the film’s success is known. This starting point value is $13.53M. This state variable is unaffected by managerial actions and describes the main source of risk that affects the sequel rights exercise option under consideration
Premium Option Discounted cash flow
Antamina a real option? In what way is the bidding structure put in place by the Peruvian government an option? The mine had a valuable real option component‚ in the form of the right to develop the mine after completing exploration. The Peruvian government requested the bidders to state both the premium that they would pay and exercise price (development expenditure) they would set for this real option. What is the correspondence between these real options and financial options? Theoretically
Premium Monte Carlo methods in finance Investment Option