Reading 35: Equity Valuation: Applications and Processes-LOS

class, choosing, 2011, criteria, important

Session 10: Equity Valuation: Valuation Concepts
Reading 35: Equity Valuation: Applications and Processes

LOS f: Illustrate the broad criteria for choosing an appropriate approach for valuing a given company

An ownership perspective can be important for an analyst determining the value of a share position. A controlling interest suggests the most appropriate model is a:

A)	dividend discount model.

B)	time series model.

C)	cash flow model.

A controlling interest suggests a cash flow model may be most appropriate since the controlling interest would allow the purchaser to set dividend policy.

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发表于 2011-3-17 12:11 | 只看该作者

Important considerations for choosing an appropriate approach for valuing a given company are least likely to include:

A)	Is the model appropriate based on the quality and availability of input data?

B)	Is the model suitable given the purpose of the analysis?

C)	Is the model consistent with the investor's IPS?

Important considerations when choosing a valuation model include:
Does the model fit the characteristics of the company?
Is the model suitable given the purpose of the analysis?
Is the model appropriate based on the quality and availability of input data?

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发表于 2011-3-17 12:11 | 只看该作者

One justification for using multiple models to estimate firm value is:

A)	the ability to streamline and economize the development process through repeated use of the same generic baseline.

B)	the ability to examine differences in estimated values can reveal how a model’s assumptions and the perspective of the analysis are affecting the estimated values.

C)	the ability to learn from each successive model and to make improvements.

One thing to remember with respect to choice of a valuation model is that the analyst does not have to consider only one. Using multiple models and examining differences in estimated values can reveal how a model’s assumptions and the perspective of the analysis are affecting the estimated values.

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Reading 35: Equity Valuation: Applications and Processes-LOS

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