• Describe a complete valuation of a listed company in a written project report including a historical financial analysis of the company`s annual reports, a strategic analysis of the company and a DCF- or RI-analysis to complete the valuation.
• Formulate and apply classical DCF- and RI-analysis including estimation of the model parameters, and reflect on the assumptions behind the two models with a critical view.
• Apply at least one other approach to the valuation, such as the use of multiples and peer groups for the company which is valuated, and/or a real option valuation, and/or an abnormal earnings growth approach.
• Evaluate the results of the valuation in the project report at the oral examination including the literature used in the course.

In Valuation you get to apply everything you have learned in your study of economics and business administration. Only your imagination sets the limits. In valuing a stock or a company you need to have an idea of the firm's current assets and liabilities and its ability to create value in the future. In order to avoid pure speculation, you will first acquire a thorough knowledge of the firm's business and its markets, and you will perform a historical financial statement analysis in which you will focus your reformulations on historical value creation. You will try to identify the key sensitivities to general and industry specific factors for comparing historical performance to past economic conditions: what are the persistent and what are the transitory factors? A thorough strategic analysis of the firm and its markets is the next step. Combining this knowledge with statistical tools allows you to make forecasts of future value creation, and you can do this as complicated as you want. Converting these forecasts into a value of the firm today requires discounting both for time and for risk, and discounting may not be as simple as you think.

We will first go through the standard approaches to corporate valuation as they are used in practice. You and your partners will start early on analyzing a specific company, which will eventually lead to your final report. The second part of the course takes you through some new approaches to valuation and, in particular, how to discount for time and for risk. You may want to include some of these new approaches in your report, or you may use this knowledge for critically assessing the problems in the standard approaches.

The course combines the participants’ prior knowledge of finance and investment theory, financial statement analysis and corporate strategy and is therefore primarily suited for masters students in the final part of their study program. The students have to write a project report on the valuation of preferably a listed company in groups of 4--5 students. This report must be handed in before Christmas,and it will be the basis for the oral exam in January.

Christensen, P. O., and G. A. Feltham. 2009. Equity Valuation, Foundations and Trends in Accounting 4, 1--112.

Nissim, D., and S. H. Penman. 2001. Ratio Analysis and Equity Valuation: From Research to Practice, Review of Accounting Studies 6, 109--154.

Penman, S. H.: Financial Statement Analysis and Security Valuation, McGraw-Hill, latest edition.

A collection of supplementary articles and notes will be handed out as the course proceeds.