Aswath Damodaran

There is no mangled nor misunderstood aspect of financial analysis than currencies. From the laziness of assuming that government bond rates are always risk free to the ludicrous notion of a global risk free rate to the absurdity of discounting peso cash flows at a dollar cost of capital., currency confusions abound. I use three big misconceptions about currencies to update my currency risk free rates and fundamentals.Slides: http://www.stern.nyu.edu/~adamodar/pdfiles/blog/dataupdate4for2018.pdfBlog Post: https://aswathdamodaran.blogspot.in/2018/01/january-2018-data-update-4-currency.htmlDatasets:Govt Bond based risk free rates: http://www.stern.nyu.edu/~adamodar/pc/blog/currencyriskfree2018.xlsxDifferential inflation risk free rates: http://www.stern.nyu.edu/~adamodar/pc/blog/CountryInflationRates.xlsx Learn more about your ad choices. Visit megaphone.fm/adchoices

In the first six months of this year, stock, bond and collectible markets have been upended, with the riskiest investments within each class being damaged the most. It is facile to attribute this to a long overdue correction and I argue that the answer may lie in risk capital, i.e., the capital that is invested in the riskiest assets. Through history, risk capital has ebbed and flowed, with the ebbs and flows affecting risk premiums, the gaps between price and value and the survival/failure of the youngest, riskiest businesses. After a decade, during which risk capital has been plentiful and easily accessible, and following a boom year in 2021, risk capital is retreating in 2022. The question for investors is whether this is temporary, as it was in 2020, in which case you should see risky assets rebounding, or whether it a longer term retrenchment.Slides: https://www.stern.nyu.edu/~adamodar/pdfiles/blog/RiskCapital2022.pdfBlog Post: Equity Risk Premium on July 1, 2022: https://www.stern.nyu.edu/~adamodar/pc/implprem/ERPJuly22.xlsx Learn more about your ad choices. Visit megaphone.fm/adchoices

Taxes always matter, but this year, they matter more than most because the US tax code has been changed in significant ways, especially for corporate taxes. In this session, I look at the major changes in the tax reform package and how these changes will play out in cash flows, growth, cost of capital and value. I estimate both an overall value effect and redistributive implications, i.e., sectors that will benefit the most and face the most pain from the changes. Slides: http://www.stern.nyu.edu/~adamodar/pdfiles/blog/dataupdate3for2018.pdfSpreadsheet for value calculation: http://www.stern.nyu.edu/~adamodar/pc/blog/taxreformeffect.xlsaxSector tax effects: http://www.stern.nyu.edu/~adamodar/pc/blog/SectorTaxEffect.xlsaxBlog Post: https://aswathdamodaran.blogspot.com/2018/01/january-2018-data-update-3-taxing.html Learn more about your ad choices. Visit megaphone.fm/adchoices

As investors and businesses look beyond domestic markets, assessing the riskiness of the countries that they invest in, and charging an appropriate amount for that risk has become a key component of investing. In this session, I provide my semi-annual update on country risk, by first looking at the drivers of country risk (political freedom, legal rights, exposure to violence, extent of corruption) and then examining sovereign default risk (ratings and CDS) and equity risk premiums in markets. On every dimension, it has been an eventful six months as risk premiums have risen across the board, and coupled with higher riskfree rates (across most currencies) have pushed up the median costs of capital for US and global companies by 3-3.5%, almost unprecedented for a half year period. Slides: https://www.stern.nyu.edu/~adamodar/pdfiles/blog/CountryRisk2022.pdfBlog Post: https://aswathdamodaran.blogspot.com/2022/07/country-risk-2022-mid-year-update.htmlPaper (for download; it is boring and long, but it covers all the bases): https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4161010 Datasets1. Corruption, Legal Rights and Peace Scores, by country: https://www.stern.nyu.edu/~adamodar/pc/blog/CountryRiskJuly22.xlsx2. Default spreads and Equity Risk Premiums, by country: https://www.stern.nyu.edu/~adamodar/pc/datasets/ctrypremJuly22.xlsx Learn more about your ad choices. Visit megaphone.fm/adchoices

US equities had a very good year in 2018, delivering a return of 21.65% for the year (with price appreciation built in). In this session, I put those returns in historical perspective and examine changes in fundamentals, for both stocks and bonds. I also look at the forward looking equity risk premium for US stocks and compare that number to historic norms. All in all, US stocks ended the year healthier than they started the year, with the primary questions for next year becoming how the new tax code will affect next year's numbers.Slides: http://www.stern.nyu.edu/~adamodar/pdfiles/blog/dataupdate2for2018.pdfBlog Post: https://aswathdamodaran.blogspot.com/2018/01/january-2017-data-update-2-buoyancy-of.htmlData: 1. Historical stock returns (1928-2017): http://www.stern.nyu.edu/~adamodar/pc/datasets/histretSP.xls2. Implied ERP for January 1, 2018:http://www.stern.nyu.edu/~adamodar/pc/implprem/ERPJan18.xls3. Historical Implied ERP for S&P 500:http://www.stern.nyu.edu/~adamodar/pc/datasets/histimpl.xls4. Actual vs Intrinsic Interest Rates:http://www.stern.nyu.edu/~adamodar/pc/datasets/intrinsicvsactualrate.xlsx Learn more about your ad choices. Visit megaphone.fm/adchoices

In this session, I continue with the discussion of the right financing mix for a firm, before developing a framework for finding the right financing type for a firm.Slides: https://www.stern.nyu.edu/~adamodar/pdfiles/execcf/session10.pdf(This is a blast from the past, since these are recordings of a corporate finance class that I taught in the Stern Trium MBA program in January 2016. That said, corporate finance first principles don't magically change over time, and while nothing is timeless, the lessons hold up. The class was a three-day class, with twelve recordings of about an hour and a half each. You can get the entire playlist by going here:https://www.youtube.com/playlist?list=PLUkh9m2BorqlDu2zrSN9WZ3xEp3qNgnQj The webpage for the class, with links to additional material is here:https://pages.stern.nyu.edu/~adamodar/New_Home_Page/webcastexeccf16.htmThe lecture notes for the class are at this link:https://pages.stern.nyu.edu/~adamodar/pdfiles/execs/cf2day2016.pdf) Learn more about your ad choices. Visit megaphone.fm/adchoices

I collect raw data (accounting & market) for all publicly traded companies at the start of every year and summarize it on my web site. This is the first of a series of posts about the information in that data.Slides: http://www.stern.nyu.edu/~adamodar/pdfiles/blog/dataupdate1for2018.pdfCurrent Data page on website: http://www.stern.nyu.edu/~adamodar/New_Home_Page/data.htmlBlog Post: https://aswathdamodaran.blogspot.com/2018/01/january-2018-data-update-1-numbers-dont.html Learn more about your ad choices. Visit megaphone.fm/adchoices

In this session (second half of morning session, day 1), I presented big picture valuations of three companies, and talked about the process of getting the inputs to value companiesSlides: https://www.stern.nyu.edu/~adamodar/pdfiles/execs/val2daysession1B.pdf(This is the first of eight sessions, recorded of a two-day valuation class that I taught for NYU's Trium MBA class in 2022. The playlist with all eight sessions is here:https://pages.stern.nyu.edu/~adamodar/New_Home_Page/execclass.htmThe webpage for the class is here:https://pages.stern.nyu.edu/~adamodar/New_Home_Page/valseminar2day.htmlThe entire lecture notes are at this link:https://pages.stern.nyu.edu/~adamodar/pdfiles/execs/val2day2022.pdf) Learn more about your ad choices. Visit megaphone.fm/adchoices

My contention that Bitcoin is more currency than asset and that it cannot be valued provoked reaction, some reasoned and some not. While I continue to believe that Bitcoin's end game is to become a currency, either widely accepted or a gold-like niche, I think that you could make the case for some crypto currencies, like Ethereal, being more commodities than currencies and others, like ICOs, being more assets. Slides: http://www.stern.nyu.edu/~adamodar/pdfiles/blog/BitcoinBlowback.pdfBlog Post: Learn more about your ad choices. Visit megaphone.fm/adchoices

In this session (first half of afternoon session, day 1), I looked at how best to estimate risk free rates in different currencies and the fundamentals that determine relative risk (beta), key ingredients in valuation.Slides: https://www.stern.nyu.edu/~adamodar/pdfiles/execs/val2daysession2A.pdf(This is the first of eight sessions, recorded of a two-day valuation class that I taught for NYU's Trium MBA class in 2022. The playlist with all eight sessions is here:https://pages.stern.nyu.edu/~adamodar/New_Home_Page/execclass.htmThe webpage for the class is here:https://pages.stern.nyu.edu/~adamodar/New_Home_Page/valseminar2day.htmlThe entire lecture notes are at this link:https://pages.stern.nyu.edu/~adamodar/pdfiles/execs/val2day2022.pdf) Learn more about your ad choices. Visit megaphone.fm/adchoices

As the Bitcoin price boom continues, the big question has become whether it is over valued. In the session, I argue that the question is unanswerable, because Bitcoin is not an asset, but a currency, and currencies can only be priced, rather than valued. That said, Bitcoin's long term sustenance depends on it becoming a better currency, one that is accepted in more transactions and one that is a more stable store of value.Slides: http://www.stern.nyu.edu/~adamodar/pdfiles/blog/BitcoinAsset.pdfBlog Post: https://aswathdamodaran.blogspot.com/2017/10/the-bitcoin-boom-asset-currency.html Learn more about your ad choices. Visit megaphone.fm/adchoices

In this session (second half of afternoon session, day 1), I started with an assessment of equity risk premiums before examining the fundamentals that determine growth and the constraints that keep terminal value in check.Slides: https://www.stern.nyu.edu/~adamodar/pdfiles/execs/val2daysession2B.pdf(This is the first of eight sessions, recorded of a two-day valuation class that I taught for NYU's Trium MBA class in 2022. The playlist with all eight sessions is here:https://pages.stern.nyu.edu/~adamodar/New_Home_Page/execclass.htmThe webpage for the class is here:https://pages.stern.nyu.edu/~adamodar/New_Home_Page/valseminar2day.htmlThe entire lecture notes are at this link:https://pages.stern.nyu.edu/~adamodar/pdfiles/execs/val2day2022.pdf) Learn more about your ad choices. Visit megaphone.fm/adchoices

I am an Amazon Prime member and I never cease to be amazed at the value that I get for the $99 that I pay as a membership fee. In addition to free shipping, I get access to Amazon Media and Kindle books. In October 2017, I was joined by 85 million other Prime members who also felt as I did, and the open question is whether Amazon Prime is a loss leader for Amazon, intended to create benefits elsewhere or a value creator for Amazon. I use the user-value model that I created for Uber to value Amazon members and conclude that Amazon Prime creates $62.2 billion in value for the company. I confess I make lots of assumptions along the way, but you are welcome to disagree.Spreadsheet: http://www.stern.nyu.edu/~adamodar/pc/blog/AmazonPrimeOct2017.xlsxBlog Post: http://bit.ly/2zu6qhQ Learn more about your ad choices. Visit megaphone.fm/adchoices

In this session (first half of morning session, day 2), I started on the loose ends in valuation with an evaluation of how to deal with cash held by a business, how to value cross holding, factor in complexity and the value of non-operating assetsSlides: https://www.stern.nyu.edu/~adamodar/pdfiles/execs/val2daysession3A.pdf(This is the first of eight sessions, recorded of a two-day valuation class that I taught for NYU's Trium MBA class in 2022. The playlist with all eight sessions is here:https://pages.stern.nyu.edu/~adamodar/New_Home_Page/execclass.htmThe webpage for the class is here:https://pages.stern.nyu.edu/~adamodar/New_Home_Page/valseminar2day.htmlThe entire lecture notes are at this link:https://pages.stern.nyu.edu/~adamodar/pdfiles/execs/val2day2022.pdf) Learn more about your ad choices. Visit megaphone.fm/adchoices

Tax reform proposals always start with claims that they will make the tax code fairer and simpler, but they almost always end up doing the opposite. I take a look at its proposed changes in the proposed tax reform of 2017, and trace the effects these changes will have on how (and how much) companies invest, how much they will earn and grow, and on how they finance themselves. There will be winners and losers, if this package become law, and there is both good and bad in it.Slides: http://www.stern.nyu.edu/~adamodar/pdfiles/blog/TaxReform2017.pdfBlog Post: Industry Average Tax Rates: http://www.stern.nyu.edu/~adamodar/pc/datasets/taxrate.xls Learn more about your ad choices. Visit megaphone.fm/adchoices

In this session (second half of morning session, day 2), I started with a quick discussion of the values of brand names and franchise value and an analysis of the expected value of control, before embarking on a valuation of Amazon in 2000, to illustrate the challenges in valuing young companies.Slides: https://www.stern.nyu.edu/~adamodar/pdfiles/execs/val2daysession3B.pdf(This is the first of eight sessions, recorded of a two-day valuation class that I taught for NYU's Trium MBA class in 2022. The playlist with all eight sessions is here:https://pages.stern.nyu.edu/~adamodar/New_Home_Page/execclass.htmThe webpage for the class is here:https://pages.stern.nyu.edu/~adamodar/New_Home_Page/valseminar2day.htmlThe entire lecture notes are at this link:https://pages.stern.nyu.edu/~adamodar/pdfiles/execs/val2day2022.pdf) Learn more about your ad choices. Visit megaphone.fm/adchoices

Tesla has been a bright star in the investing universe for much of the last decade. It's rise in market capitalization, now higher than that of GM or Ford, can be traced to Elon Musk's vision and the company's innovative products, and it is quite clear that the company has disrupted the automobile business. In spite of its successes, though, I think that the company is too richly priced given the challenges it faces over the next decade. It's use of debt is puzzling, given that it derives no tax benefits from borrowing and is putting its promise and potential at risk of distress. Slides: http://www.stern.nyu.edu/~adamodar/pdfiles/blog/Tesla2017.pdfBlog Post: Valuation of Tesla: http://www.stern.nyu.edu/~adamodar/pc/blog/TeslaAugust2017.xlsx Learn more about your ad choices. Visit megaphone.fm/adchoices

In this session (first half of morning session, day 1), I provide a rationale for why I do valuation and then list out the broad themes in valuation: that it is a craft, that valuing ≠ pricing, that a good valuation is a melding of story and numbers and that acting on valuation requires faith. I also listed out some common misconceptions about valuation.Slides: https://www.stern.nyu.edu/~adamodar/pdfiles/execs/val2daysession1A.pdf(This is the first of eight sessions, recorded of a two-day valuation class that I taught for NYU's Trium MBA class in 2022. The playlist with all eight sessions is here:https://pages.stern.nyu.edu/~adamodar/New_Home_Page/execclass.htmThe webpage for the class is here:https://pages.stern.nyu.edu/~adamodar/New_Home_Page/valseminar2day.htmlThe entire lecture notes are at this link:https://pages.stern.nyu.edu/~adamodar/pdfiles/execs/val2day2022.pdf) Learn more about your ad choices. Visit megaphone.fm/adchoices

If you define success as a surging market price, crypto currencies have been incredibly successful, with Bitcoin and Ether leading the way. However, viewed as currencies, crypto currencies have not made much headway as mediums of exchange or stores of value. I argue that that the characteristics that have made crypto currencies so attractive to traders (the volatility and large price movements) have made them unattractive to transactors, and that the promoters of crypto currencies need to change both their marketing and design focus towards making them succeed as currencies.Slides: http://www.stern.nyu.edu/~adamodar/pdfiles/blog/CryptoCurrencies.pdfBlog Post: https://aswathdamodaran.blogspot.com/2017/08/the-crypto-currency-debate-future-of.html Learn more about your ad choices. Visit megaphone.fm/adchoices

In this session (second half of the afternoon session, day 2), I spent some time using my Uber valuation in June 2014 to illustrate the link between stories and numbers, before closing out with a discussion of how best to price companies.Slides: https://www.stern.nyu.edu/~adamodar/pdfiles/execs/val2daysession4B.pdf(This is the first of eight sessions, recorded of a two-day valuation class that I taught for NYU's Trium MBA class in 2022. The playlist with all eight sessions is here:https://pages.stern.nyu.edu/~adamodar/New_Home_Page/execclass.htmThe webpage for the class is here:https://pages.stern.nyu.edu/~adamodar/New_Home_Page/valseminar2day.htmlThe entire lecture notes are at this link:https://pages.stern.nyu.edu/~adamodar/pdfiles/execs/val2day2022.pdf) Learn more about your ad choices. Visit megaphone.fm/adchoices

I am a teacher and have been putting my classes online for almost 20 years. That said, there is a big difference between putting classes online and teaching online, and I am still learning about that difference. Keeping students engaged, enthused and on task, when you are teaching a class online, is much more difficult that doing so in a classroom. I created my first online classes about five years ago and now have free online classes on corporate finance, valuation and investment philosophies.Corporate Finance: http://pages.stern.nyu.edu/~adamodar/New_Home_Page/webcastcfonline.htmValuation: http://pages.stern.nyu.edu/~adamodar/New_Home_Page/webcastvalonline.htmInvestment Philosophies: http://pages.stern.nyu.edu/~adamodar/New_Home_Page/webcastinvphil.htmThe problem with these classes is that while they deliver the content, there is no interaction, exams/quizzes or projects and thus no certification. Last semester, NYU decided to offer my valuation class as a certification class and this class comes with more interaction, testing and a certificate. That is the good news. The bad news is that you pay NYU prices. If you can afford those prices, here is the link to the Fall 2017 version of the Valuation certificate and an advance link to the Spring 2018 Pilot version of the corporate finance class. Stern Valuation Certificate (Fall 2017): http://www.stern.nyu.edu/programs-admissions/online-certificate-courses/online-valuation-courseStern Corporate Finance Certificate Pilot (Spring 2018): http://www.stern.nyu.edu/programs-admissions/online-certificate-courses/online-corporate-finance-courseIf you cannot afford the price or you feel that it is not worth it, please try the free online classes instead. Learn more about your ad choices. Visit megaphone.fm/adchoices

In this session (first half of afternoon session, day 2), I looked at a series of difficult to value companies, from distressed firms, to commodity and financial service firms and ending with private companies. I also laid out the process for connecting stories to numbers in valuation.Slides: https://www.stern.nyu.edu/~adamodar/pdfiles/execs/val2daysession4A.pdf(This is the first of eight sessions, recorded of a two-day valuation class that I taught for NYU's Trium MBA class in 2022. The playlist with all eight sessions is here:https://pages.stern.nyu.edu/~adamodar/New_Home_Page/execclass.htmThe webpage for the class is here:https://pages.stern.nyu.edu/~adamodar/New_Home_Page/valseminar2day.htmlThe entire lecture notes are at this link:https://pages.stern.nyu.edu/~adamodar/pdfiles/execs/val2day2022.pdf) Learn more about your ad choices. Visit megaphone.fm/adchoices

There is no place to hide from country risk. Even investors who stay focused on domestic stocks are exposed, sometimes unwittingly, to foreign markets. Consequently, it is important that we not only understand why risk varies across countries but how to measure it and bring it into analyses. To accompany my annual update to country risk, I summarize my findings in this session and talk about how to incorporate country risk into valuation.Slides: http://www.stern.nyu.edu/~adamodar/pdfiles/blog/CountryRisk2017.pdfPaper: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3000499Blog Post: https://aswathdamodaran.blogspot.com/2017/07/the-dark-side-of-globalization-update.htmlSpreadsheet with ERP for countries: http://www.stern.nyu.edu/~adamodar/pc/blog/ctrypremJuly17.xls Learn more about your ad choices. Visit megaphone.fm/adchoices

If the value of your business is driven by users or subscribers, having an intrinsic value model built around users may give you imperfect estimates of value if the company is young, but the model can also be used to draw out general propositions about value. These propositions can be used by investors to ask the right questions and assess value (or price) and by managers to make the right choices, when they have to make trade offs.Slides: http://www.stern.nyu.edu/~adamodar/pdfiles/blog/UserEconomics.pdfBlog Post: https://aswathdamodaran.blogspot.com/2017/07/usersubscriber-economics-value-dynamics.htmlUser valuation spreadsheet (Uber): http://www.stern.nyu.edu/~adamodar/pc/blog/uberuserJune17.xlsx Learn more about your ad choices. Visit megaphone.fm/adchoices

One critique of DCF models is that they were designed to value old economy companies and do not work for new economy firms built on users and subscribers. In this session, I show that DCF models can be adapted to value users, both existing and new, and value a company based on its users/subscribers. I use Uber to illustrate the process and the information that you need to value the company on a user basis. Slides: http://www.stern.nyu.edu/~adamodar/pdfiles/blog/UberUserJune2017.pdfSpreadsheet: http://www.stern.nyu.edu/~adamodar/pc/blog/uberuserJune17.xlsxBlog Post: Learn more about your ad choices. Visit megaphone.fm/adchoices

In this session, I start by defining risk and then considering the best ways to measure risk in finance.Slides: https://www.stern.nyu.edu/~adamodar/pdfiles/execcf/session3.pdf(This is a blast from the past, since these are recordings of a corporate finance class that I taught in the Stern Trium MBA program in January 2016. That said, corporate finance first principles don't magically change over time, and while nothing is timeless, the lessons hold up. The class was a three-day class, with twelve recordings of about an hour and a half each. You can get the entire playlist by going here:https://www.youtube.com/playlist?list=PLUkh9m2BorqlDu2zrSN9WZ3xEp3qNgnQj The webpage for the class, with links to additional material is here:https://pages.stern.nyu.edu/~adamodar/New_Home_Page/webcastexeccf16.htmThe lecture notes for the class are at this link:https://pages.stern.nyu.edu/~adamodar/pdfiles/execs/cf2day2016.pdf) Learn more about your ad choices. Visit megaphone.fm/adchoices

Uber has always been a newsworthy company, even if the news has not always made it look good. That said, the company has outdone itself in the last few months, with its legal tussles with Google on the driverless car, Travis Kalanick's YouTube argument with an Uber driver and accusations of sexual harassment all keeping it in the news. While there are some who are predicting doomsday for the company, I disagree. There are many subgroups that are critical to Uber's success (customers, drivers, regulators, engineers, managers, investors) and while any one of them could bring the company down, each group has more to lose from the company imploding than seeing it succeed. That said, the events from the last week may lead to a repricing of the company to reflect a more realistic assessment of both its potential and its problems.Slides: http://www.stern.nyu.edu/~adamodar/pdfiles/blog/UberJune2017.pdfValuation: http://www.stern.nyu.edu/~adamodar/pc/blog/uberJune17.xlsBlog Post: http://aswathdamodaran.blogspot.com/2017/06/ubers-bad-week-doomsday-scenario-or.html Learn more about your ad choices. Visit megaphone.fm/adchoices

In this session, I began by going through the project workbook, to make judgments on who the marginal investors in a company are and then talked about how to estimate the risk free rate, before introducing the equity risk premium (with the historical and implied approaches).Slides: https://www.stern.nyu.edu/~adamodar/pdfiles/execcf/session4.pdfProject Workbook: https://www.stern.nyu.edu/~adamodar/pdfiles/execs/projworkbookJan2016.pdf(This is a blast from the past, since these are recordings of a corporate finance class that I taught in the Stern Trium MBA program in January 2016. That said, corporate finance first principles don't magically change over time, and while nothing is timeless, the lessons hold up. The class was a three-day class, with twelve recordings of about an hour and a half each. You can get the entire playlist by going here:https://www.youtube.com/playlist?list=PLUkh9m2BorqlDu2zrSN9WZ3xEp3qNgnQj The webpage for the class, with links to additional material is here:https://pages.stern.nyu.edu/~adamodar/New_Home_Page/webcastexeccf16.htmThe lecture notes for the class are at this link:https://pages.stern.nyu.edu/~adamodar/pdfiles/execs/cf2day2016.pdf) Learn more about your ad choices. Visit megaphone.fm/adchoices

While it is natural for market participants to disagree about the future course of the market and the economy, the degree of divergence in today's markets is greater than in most. For every indicator that suggests that low risk in equities, there is another indicator that suggests the exact opposite. Consumers and businesses seem to be in a better mood (as revealed in confidence numbers) but they don't seem to spending accordingly. I suggest three reasons for the divergence: crisis weariness, disagreement about the magnitude of policy changes and consequences and political differences (a spill over of the partisanship that infects every thing else we do).Blog post: http://aswathdamodaran.blogspot.com/2017/06/a-tale-of-two-markets-politics-and.htmlSlides: http://www.stern.nyu.edu/~adamodar/pdfiles/blog/TaleofTwoMarkets.pdf Learn more about your ad choices. Visit megaphone.fm/adchoices

In this session, I started with the conventional regression approach to estimating betas and how the regression can yield important details about the firm's past market performance and risk attributes.Slides: https://www.stern.nyu.edu/~adamodar/pdfiles/execcf/session5.pdf(This is a blast from the past, since these are recordings of a corporate finance class that I taught in the Stern Trium MBA program in January 2016. That said, corporate finance first principles don't magically change over time, and while nothing is timeless, the lessons hold up. The class was a three-day class, with twelve recordings of about an hour and a half each. You can get the entire playlist by going here:https://www.youtube.com/playlist?list=PLUkh9m2BorqlDu2zrSN9WZ3xEp3qNgnQj The webpage for the class, with links to additional material is here:https://pages.stern.nyu.edu/~adamodar/New_Home_Page/webcastexeccf16.htmThe lecture notes for the class are at this link:https://pages.stern.nyu.edu/~adamodar/pdfiles/execs/cf2day2016.pdf) Learn more about your ad choices. Visit megaphone.fm/adchoices

In this last session, I used Dante's Inferno to illustrate my visions of hell in DCF valuation and followed up by summarizing what you found in your valuations.Closing Presentation: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/valclosespr17.pdf Summaries of class valuations: http://www.stern.nyu.edu/~adamodar/pc/eqrec/spr2017.xls Learn more about your ad choices. Visit megaphone.fm/adchoices

In this session, I examine the fundamentals that determine betas, and how using industry averages and correcting for differences in leverage can yield better estimates of betas not only for companies, but their business segments.Slides: https://www.stern.nyu.edu/~adamodar/pdfiles/execcf/session6.pdf(This is a blast from the past, since these are recordings of a corporate finance class that I taught in the Stern Trium MBA program in January 2016. That said, corporate finance first principles don't magically change over time, and while nothing is timeless, the lessons hold up. The class was a three-day class, with twelve recordings of about an hour and a half each. You can get the entire playlist by going here:https://www.youtube.com/playlist?list=PLUkh9m2BorqlDu2zrSN9WZ3xEp3qNgnQj The webpage for the class, with links to additional material is here:https://pages.stern.nyu.edu/~adamodar/New_Home_Page/webcastexeccf16.htmThe lecture notes for the class are at this link:https://pages.stern.nyu.edu/~adamodar/pdfiles/execs/cf2day2016.pdf) Learn more about your ad choices. Visit megaphone.fm/adchoices

In this session, I look at the cost of debt for a company, and how it is incorporated into a cost of capital. I also open the door to measuring returns on individual projects.Slides: https://www.stern.nyu.edu/~adamodar/pdfiles/execcf/session7.pdf(This is a blast from the past, since these are recordings of a corporate finance class that I taught in the Stern Trium MBA program in January 2016. That said, corporate finance first principles don't magically change over time, and while nothing is timeless, the lessons hold up. The class was a three-day class, with twelve recordings of about an hour and a half each. You can get the entire playlist by going here:https://www.youtube.com/playlist?list=PLUkh9m2BorqlDu2zrSN9WZ3xEp3qNgnQj The webpage for the class, with links to additional material is here:https://pages.stern.nyu.edu/~adamodar/New_Home_Page/webcastexeccf16.htmThe lecture notes for the class are at this link:https://pages.stern.nyu.edu/~adamodar/pdfiles/execs/cf2day2016.pdf) Learn more about your ad choices. Visit megaphone.fm/adchoices

In this class, we started by drawing a contrast between price and value enhancement. With value enhancement, we broke down value change into its component parts: changing cash flows from existing assets, changing growth rates by either reinvesting more or better, lengthening your growth period by creating or augmenting competitive advantages and lowering your cost of capital. We then used this framework to compute an expected value of control as a the product of the probability of changing the way a company is run and the value increase from that change (optimal - status quo value). This expected value of control allows us to explain why market prices for stocks rise when corporate governance improves, why voting shares usually trade at a premium over non-voting shares (and why they sometimes don't).Start of the class test: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/tests/valenh.pdfSlides: http://www.stern.nyu.edu/~adamodar/podcasts/valUGspr17/session27.pdfPost class test: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session27Atest.pdfPost class test solution: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session27Asoln.pdf Learn more about your ad choices. Visit megaphone.fm/adchoices

In this session, I use a Disney theme park proposed investment to illustrate how to estimate earnings and cash flows for projects, and convert those into measure of investment returns.Slides: https://www.stern.nyu.edu/~adamodar/pdfiles/execcf/session8.pdf(This is a blast from the past, since these are recordings of a corporate finance class that I taught in the Stern Trium MBA program in January 2016. That said, corporate finance first principles don't magically change over time, and while nothing is timeless, the lessons hold up. The class was a three-day class, with twelve recordings of about an hour and a half each. You can get the entire playlist by going here:https://www.youtube.com/playlist?list=PLUkh9m2BorqlDu2zrSN9WZ3xEp3qNgnQj The webpage for the class, with links to additional material is here:https://pages.stern.nyu.edu/~adamodar/New_Home_Page/webcastexeccf16.htmThe lecture notes for the class are at this link:https://pages.stern.nyu.edu/~adamodar/pdfiles/execs/cf2day2016.pdf) Learn more about your ad choices. Visit megaphone.fm/adchoices

In this session, I look at the trade offs on using debt, and how the cost of capital can be used as an optimizing tool to determine the right mix of debt and equity for a firm.Slides: https://www.stern.nyu.edu/~adamodar/pdfiles/execcf/session9.pdf(This is a blast from the past, since these are recordings of a corporate finance class that I taught in the Stern Trium MBA program in January 2016. That said, corporate finance first principles don't magically change over time, and while nothing is timeless, the lessons hold up. The class was a three-day class, with twelve recordings of about an hour and a half each. You can get the entire playlist by going here:https://www.youtube.com/playlist?list=PLUkh9m2BorqlDu2zrSN9WZ3xEp3qNgnQj The webpage for the class, with links to additional material is here:https://pages.stern.nyu.edu/~adamodar/New_Home_Page/webcastexeccf16.htmThe lecture notes for the class are at this link:https://pages.stern.nyu.edu/~adamodar/pdfiles/execs/cf2day2016.pdf) Learn more about your ad choices. Visit megaphone.fm/adchoices

This is a webcast that leads you through the spreadsheet that I use to value most companies, called fcffsimpleginzu.xls. In keeping with my theme of connecting stories to numbers, I use Severstal, a Russian company, to illustrate how I constructed my story and then converted the story into numbers on the spreadsheet. Slides: http://www.stern.nyu.edu/~adamodar/pdfiles/blog/ginzuWebcast.pdfSeverstal valuation: http://www.stern.nyu.edu/~adamodar/pc/blog/Severstal2017.xlsGinzu Spreadsheet: http://www.stern.nyu.edu/~adamodar/pc/fcffsimpleginzu2017.xls Learn more about your ad choices. Visit megaphone.fm/adchoices

In this session, I start by looking at the historical trends/practices in dividends, and then use the trade offs to determine how much cash firms should return, and in what form.Slides: https://www.stern.nyu.edu/~adamodar/pdfiles/execcf/session11.pdf(This is a blast from the past, since these are recordings of a corporate finance class that I taught in the Stern Trium MBA program in January 2016. That said, corporate finance first principles don't magically change over time, and while nothing is timeless, the lessons hold up. The class was a three-day class, with twelve recordings of about an hour and a half each. You can get the entire playlist by going here:https://www.youtube.com/playlist?list=PLUkh9m2BorqlDu2zrSN9WZ3xEp3qNgnQj The webpage for the class, with links to additional material is here:https://pages.stern.nyu.edu/~adamodar/New_Home_Page/webcastexeccf16.htmThe lecture notes for the class are at this link:https://pages.stern.nyu.edu/~adamodar/pdfiles/execs/cf2day2016.pdf) Learn more about your ad choices. Visit megaphone.fm/adchoices

Acquisitions are exciting and fun to be part of but they are not great value creators and in today's sessions, I tried to look at some of the reasons. While the mechanical reasons, using the wrong discount rate or valuing synergy & control right, are relatively easy to fix, the underlying problems of hubris, ego and over confidence are much more difficult to navigate. There are ways to succeed, though, and that is to go where the odds are best: small targets, preferably privately held or subsidiaries of public companies, with cost cutting as your primary synergy benefit. If you get a chance, take a look at a big M&A deal and see if you can break it down into its components.Slides: http://www.stern.nyu.edu/~adamodar/podcasts/valUGspr17/session26.pdfPost class test: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session26Atest.pdfPost class test solution: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session26Asoln.pdf Learn more about your ad choices. Visit megaphone.fm/adchoices

In this session, I introduce the first principles of valuation and connect corporate finance decisions to end value.Slides: https://www.stern.nyu.edu/~adamodar/pdfiles/execcf/session12.pdf(This is a blast from the past, since these are recordings of a corporate finance class that I taught in the Stern Trium MBA program in January 2016. That said, corporate finance first principles don't magically change over time, and while nothing is timeless, the lessons hold up. The class was a three-day class, with twelve recordings of about an hour and a half each. You can get the entire playlist by going here:https://www.youtube.com/playlist?list=PLUkh9m2BorqlDu2zrSN9WZ3xEp3qNgnQj The webpage for the class, with links to additional material is here:https://pages.stern.nyu.edu/~adamodar/New_Home_Page/webcastexeccf16.htmThe lecture notes for the class are at this link:https://pages.stern.nyu.edu/~adamodar/pdfiles/execs/cf2day2016.pdf) Learn more about your ad choices. Visit megaphone.fm/adchoices

In today's class, we put the closing touched on dividend policy analysis by going through the possess of estimating FCFE, the cash flow left over after capital expenditures, working capital needs and debt payments. In the second half of the class, we laid the foundations for valuing companies by talking about the importance of narrative and connecting them to numbers. If you are interested, here is the talk that I gave to on the topic at the Museum of American Finance a few weeks ago:https://www.youtube.com/watch?v=5bMaGns02ak It is about an hour long, but you can watch a little bit of it, if you are so inclined. We ended the class by talking about the distinction between valuing equity and valuing an entire business and the way we estimate cash flows and discount rates in each case. Slides: http://www.stern.nyu.edu/~adamodar/podcasts/cfspr17/session24.pdfPost class test: http://www.stern.nyu.edu/~adamodar/pdfiles/cfovhds/postclass/session24test.pdfPost class test solution: http://www.stern.nyu.edu/~adamodar/pdfiles/cfovhds/postclass/session24soln.pdf Learn more about your ad choices. Visit megaphone.fm/adchoices

I valued Zomato a little over a year ago (on July 21), ahead of its IPO, and estimated a value of ₹41 per share. The market, as it almost does, had other ideas and the stock, which had an offering price of ₹74, soared 51% on the first day of trading and stayed at stratospheric levels for much of 2021, even as earnings reports from the company reported steeper losses. In 2022, the company's stock has come back to earth, and the mood has shifted, partly as a result of macro shifts (increased inflation and a flight of risk capital). The stock which has been dropping all year has seen the bottom fall out in the last few weeks, first in response to a conflicted and questionable investment in Blinkit, and next as the lock-in period for insiders expired, and the stock was priced at close to ₹41 on July 26. While I view this convergence as luck (even a broken clock is right at least twice every day), I updated my valuation for the company incorporating the most recent earnings reports and the macro changes (higher riskfree rates and risk premiums) to yield a value per share of ₹35, with much of the decline due to macro changes. (The attached spreadsheet has a do-it-yourself valuation that you can use to tell your own story and arrive at your own value for Zomato. Good luck!)Slides: https://www.stern.nyu.edu/~adamodar/pdfiles/blog/ZomatoUpdate.pdfBlog Post: https://aswathdamodaran.blogspot.com/2022/07/a-zomato-2022-update-value-pricing-and.htmlValuation Spreadsheet: https://www.stern.nyu.edu/~adamodar/pc/blog/ZomatoDIY2022.xlsx Learn more about your ad choices. Visit megaphone.fm/adchoices

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Inflation has taken center stage, in markets, and in policy makers' minds, for much of 2022. For much of the year, the market has been trying to play catch up with inflation, with expectations running behind actual inflation, and prices adjusting, as a consequence. In this session, I pull together material that you might have already seen in my three earlier sessions this year on inflation, and update the numbers for an eventful summer. In short, expected inflation continues to rise, pushing up interest rates and creating havoc in currency markets, as first order effects. As inflation has risen, risk capital has moved to the sidelines, and stayed there, and risk premiums are up in both stock and bond markets. Taking stock in September 2022, with a recession looming, I value the S&P 500 index, and find it to be valued to reflect a gloomy future. Whether you find stocks a bargain or not will depend, in large part, on whether your views of the future of the economy and how inflation plays out are more upbeat or downbeat than market expectations.Slides: https://www.stern.nyu.edu/~adamodar/pdfiles/blog/InflationUpdate.pdfBlog Post: https://aswathdamodaran.blogspot.com/2022/09/inflation-interest-rates-and-stock.htmlSpreadsheet to value S&P 500: https://www.stern.nyu.edu/~adamodar/pc/blog/S&P500ValueSept23.xlsx Learn more about your ad choices. Visit megaphone.fm/adchoices

Session on Uncertainty for the Motley FoolIt is natural to feel uncertain about your value estimates, once you are done valuing a company, and second guess yourself. In this session, I start with the basic Excel tools you can use to ask what if questions, but then quickly shift away from the spreadsheets to talking about uncertainty in valuation, categorizing that uncertainty and the tools that you can use to deal with uncertainty. With what-if analyses, I talk about deciding which variables to ask questions about and how to create break even tables with multiple variables. Moving on, I address the times when scenario analysis and decisions trees can be useful in dealing with uncertainty. Finally, I look at the power of simulations. In closing, denying the existence of uncertainty or cowering in its presence does not make it go away.(At the start, I had trouble with the Goalseek function in solving for revenue growth. Don't ask me why, but it seems to work with the Solver function to yield a growth rate of 28.46% to get to the current stock price)Slides: https://www.stern.nyu.edu/~adamodar/pdfiles/country/NoiseMotleyFool.pdfPaper on probabilistic approaches:My valuation spreadsheet: https://www.stern.nyu.edu/~adamodar/pc/blog/TeslaWhatIf2022.xlsx(If you have trouble downloading, try switching browsers...) Learn more about your ad choices. Visit megaphone.fm/adchoices

After the quiz, in a shortened class, we moved on to look at how much a company can afford to pay out as dividend. This measure, that I titled FCFE, is the cash left over after taxes, reinvestment needs and net debt payments. When a company pays out less than its FCFE, it is accumulating cash, and we laid the foundations for analyzing dividend policy by asking the key question: do you trust managers with your cash? During the session, we applied this framework to the Disney and Vale. Slides: http://www.stern.nyu.edu/~adamodar/podcasts/cfspr17/session23.pdfPost class test: http://www.stern.nyu.edu/~adamodar/pdfiles/cfovhds/postclass/session23test.pdfPost class test solution: http://www.stern.nyu.edu/~adamodar/pdfiles/cfovhds/postclass/session23soln.pdf Learn more about your ad choices. Visit megaphone.fm/adchoices

In every market correction, investors discover old truths, and this one has been no different. Not only have you seen the conversation shift from scaling up to profitability, but from earnings to cash flows. Managers and investors are suddenly discovering the importance of free cash flow, but as I argue in this session, the definitions of free cash flow range from the self-serving to the delusional. I look at the mechanics of computing free cash flows, to equity and to the firm, and why you may come up with different values depending on whether you are using FCFE to explain what happened in a period, as the base for forecasting future cash flows in intrinsic valuation or as a scalar in pricing. I push back against the notion that positive free cash flows are, by themselves, indicators of company health and note how cash flows evolve as companies age. While free cash flows remain the go-to measure in intrinsic valuation, I don't think that they are good pricing metrics, in most sectors.Slides: https://www.stern.nyu.edu/~adamodar/pdfiles/blog/FreeCF.pdfMicrosoft Annual Report for 2021: https://www.microsoft.com/investor/reports/ar21/index.html Learn more about your ad choices. Visit megaphone.fm/adchoices

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This has not been a good year for Facebook, as its stock price has plummeted, and its earnings report from last week precipitated a new round of selling and finger-pointing. In this session, I start by putting the news in the most recent earnings report in perspective, but use the reaction to the report to look at bigger issues that affect tech companies. Specifically, I focus on corporate governance, and argue that much of the legislation, research and regulation in the last two decades has focused on the details of board composition and proxy voting minutiae, while giving shareholders the power to change management at the companies that they invest in. I argue that change is needed because managers can be mismatched to the companies they run, use the corporate life cycle to illustrate why these mismatches occur and explain why are more likely to happen at tech companies, with their compressed life cycles. Ironically, these are also the companies where we have acquiesced to being second-class citizens, in terms of voting rights, making change less likely in companies where it is needed the most.Slides (if download does not work, try a different browser): https://www.stern.nyu.edu/~adamodar/pdfiles/blog/FBCorpGov.pdfBlog Post: https://aswathdamodaran.blogspot.com/2022/11/meta-lesson-1-corporate-governance.html Learn more about your ad choices. Visit megaphone.fm/adchoices

We spent this session setting up the trade off on dividends, starting with the argument that Miller/Modigliani made that dividends don't matter (in a world where investors are taxed at the same rate on dividends & capital gains & stock issuance is costless) to the dividends are bad school (built on the almost century long higher tax on dividends) to the dividends are good school. We closed by looking at two bad reasons for paying dividends (that they are more certain, that you had a good year) and three potentially good reasons (to signal to market, to make your clientele happy and to take advantage of debt holders).Slides: http://www.stern.nyu.edu/~adamodar/podcasts/cfspr17/session22.pdfPost class test: http://www.stern.nyu.edu/~adamodar/pdfiles/cfovhds/postclass/session22test.pdfPost class test solution: http://www.stern.nyu.edu/~adamodar/pdfiles/cfovhds/postclass/session22soln.pdf Learn more about your ad choices. Visit megaphone.fm/adchoices

In this session, I use Facebook's most recent (and disappointing) quarterly earnings report to talk about accounting inconsistencies in categorizing expenses (into operating, financing and capital) at firms, and how this mis-categorization affects their profitability, return and debt measures. I present templates for correcting for their inconsistencies, and how these corrections can affect the value that we attach to these companies and the pricing of these companies. With Facebook, capitalizing R&D and their Metaverse investments, not only increases operating margins substantially, but also makes it clear that the drop in margins at the company in the last year or two are almost entirely due to Facebook's massive R&D and Metaverse investments. Whether you view that is good or bad depends in large part on whether you trust Facebook (and Zuckerberg) to deliver earnings and growth from the Metaverse, and that mistrust can be attributed to the company's incapacity to explain how the tens of billions of dollars will pay off over time.Slides: https://www.stern.nyu.edu/~adamodar/pdfiles/blog/FBAccounting.pdfBlog Post: https://aswathdamodaran.blogspot.com/2022/11/meta-lesson-2-accounting.html Learn more about your ad choices. Visit megaphone.fm/adchoices

In today's class, I did a quick introduction to real options, setting up the intuitive rationale for real options. We covered the basics of options, starting with why real options are so attractive to analysts and investors: they allow you to add a premium to your DCF value. The two building blocks for real option value are learning (from what is going on around you or ongoing events) and adapting your behavior. There are three questions that underlie the use of real options. The first is recognizing when you are dealing with an option, with a payoff diagram being the give away. The second is looking for exclusivity which is what gives options value. The third is using an option pricing model, which is built on replication and arbitrage. We then turned our attention to the option to delay, an option that can make the rights to bad project/technology valuable. We used it as a lever to talk about valuing patents and natural resource reserves as options, with significant caveats on both. Start of the class test: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/tests/realoption1.pdfSlides: http://www.stern.nyu.edu/~adamodar/podcasts/valUGspr17/session23.pdfPost class test: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session23Ctest.pdfPost class test solution: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session23Csoln.pdf Learn more about your ad choices. Visit megaphone.fm/adchoices

A good valuation is a bridge between stories and numbers, and Facebook's story through much of the decade has been simple and compelling, built around billions of intense users who share data about themselves, with that data being used to deliver focused advertising. That story has delivered operating results and allowed the company's market capitalization to surge over between 2012 to 2021. That story is running out of steam, partly because of the backlash on the privacy front and partly because the online ad market is leveling off. Facebook, faced with a choice, has decided to bet big on the Metaverse, but investors seem unimpressed, pricing the company on the presumption that the investment will not pay off. During the session, I argue that Facebook is facing a trust deficit that it can begin to overcome only by telling a business story that justifies the huge investments, with trackers and targets on how it plans to deliver on the story.If you have trouble with downloads, please try switching browsersSlides: https://www.stern.nyu.edu/~adamodar/pdfiles/blog/FBStory.pdfBlog Post: https://aswathdamodaran.blogspot.com/2022/11/meta-lesson-3-tell-me-story.htmlMetaverse value effect: https://www.stern.nyu.edu/~adamodar/pc/blog/FBMetaverseValue.xlsx Learn more about your ad choices. Visit megaphone.fm/adchoices

In this class, we looked at the design principles for debt. In particular, we noted the allure of matching up debt cash flows to asset cash flows: it reduces default risk and increases debt capacity. We then looked at the process of designing the perfect debt for your company, starting with the assets you have, checking to see if you still get your tax deduction, keeping different interest groups happy and sugarcoating the bond enough to make it palatable to bond holders. We then went through three basic approaches to debt design: an intuitive assessment of a company's products and pricing power, an analysis of expected cash flows on a single project and a macro economic regression of firm value/operating income against interest rates, GDP, inflation and exchange rates. In the second half of the class, we started on our discussion of dividend policy. We began by looking at some facts about dividends: they are sticky, follow earnings, are affected by tax laws, vary across countries and are increasingly being supplanted by buybacks at least in the United States. We will continue the discussion of how much companies should return to investors in the next session. In the meantime, if you are interested in what dividend policy around the world looks like, try this post of mine from earlier this year:http://aswathdamodaran.blogspot.com/2017/02/january-2017-data-update-9-dividends.html Slides: http://www.stern.nyu.edu/~adamodar/podcasts/cfspr17/session21.pdfPost class test: http://www.stern.nyu.edu/~adamodar/pdfiles/cfovhds/postclass/session21test.pdfPost class test solution: http://www.stern.nyu.edu/~adamodar/pdfiles/cfovhds/postclass/session21soln.pdf Learn more about your ad choices. Visit megaphone.fm/adchoices

I define myself as a teacher, not a professor, an academic or a researcher, and there is nothing else that I would rather do. Every spring, ahead of teaching my classes at Stern, I invite people to come along for the ride. In spring 2023, I will be teaching valuation (identical classes to the MBAs and undergrads) and corporate finance to the MBAs. While you have to be a Stern student to physically sit in on the classes, you can take my classes online, with a choice of formats. 1. You can follow along with my regular classes, watching the recorded sessions, reviewing the slides and even taking the tests/exams. 2. You can take the online versions of these classes, where I compress my 80-minute sessions into 12-15 minute sessions, again with slides and supporting material.Both formats are free, but you will not get NYU credit or certification, if that is what you seek. NYU offers three of my classes as certificate classes, but you have to pay NYU prices for that privilege. The links to the classes are below, as are the links to a site called We Are Six, which allows you to create study groups for three of the classes, to work with.Slides: https://www.stern.nyu.edu/~adamodar/pdfiles/blog/TeachingSpr23.pdfBlog Post: Regular classes (Free)1. Corporate FinanceUpcoming class (Spring '23): https://pages.stern.nyu.edu/~adamodar/New_Home_Page/webcastcfspr23.htmArchived (Spring '22): https://pages.stern.nyu.edu/~adamodar/New_Home_Page/webcastcfspr22.htm2. Valuation:Upcoming class (Spring '23): https://pages.stern.nyu.edu/~adamodar/New_Home_Page/webcasteqspr23.htmArchived (Spring '22): Upcoming class (Spring '23): https://pages.stern.nyu.edu/~adamodar/New_Home_Page/webcasteqspr22.htmArchived (Spring '22): Online classes (Free)1. Accounting: https://pages.stern.nyu.edu/~adamodar/New_Home_Page/webcastacctg.htm2. Foundations of Finance: https://pages.stern.nyu.edu/~adamodar/New_Home_Page/webcastfoundationsonline.htm3. Statistics: https://pages.stern.nyu.edu/~adamodar/New_Home_Page/webcaststatistics.htm4. Corporate Finance: https://pages.stern.nyu.edu/adamodar/New_Home_Page/webcastcfonline.htm5. Valuation: https://pages.stern.nyu.edu/~adamodar/New_Home_Page/webcastvalonline.htm6. Investment Philosophies: https://pages.stern.nyu.edu/~adamodar/New_Home_Page/webcastinvphil.htmNYU Certificate Classes (Not free)1. Corporate Finance: https://execed.stern.nyu.edu/products/corporate-finance-with-aswath-damodaran2. Valuation: https://execed.stern.nyu.edu/products/advanced-valuation-with-aswath-damodaran3. Investment Philosophies: https://execed.stern.nyu.edu/products/investment-philosophies-with-aswath-damodaranWe Are Six (Link to apps and codes for online classes)App for Android: https://play.google.com/store/apps/details?id=wearesix.io.stagingApp for iPhone: https://apps.apple.com/us/app/wearesix/id15846861011. Corporate Finance: ADCorp2. Valuation: ADValu3. Investment Philosophies: ADPhil Learn more about your ad choices. Visit megaphone.fm/adchoices

In this session, we completed our discussion of private company valuation, starting with how to deal with illiquidity when valuing private businesses. We then looked at why the value of a private business will be higher to a public company or in an IPO and the special issues that arise from IPOs, including dealing with the IPO offer proceeds and the investment banking price guarantee. We closed the session byy looking at how to deal with expected transitions as a private company moves from a sole ownership to VC financing to a public offering. If you are interested in total betas and how different they are from market betas, by sector, you can get my estimates at the link below:http://www.stern.nyu.edu/~adamodar/pc/datasets/totalbeta.xls Start of the class test: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/tests/pvtco2test.pdfSlides: http://www.stern.nyu.edu/~adamodar/podcasts/valUGspr17/session22.pdfPost class test: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session22Ctest.pdfPost class test solution: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session22Csoln.pdf Learn more about your ad choices. Visit megaphone.fm/adchoices

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In this session,we looked at applying closure to the optimal debt ratio analysis by looking at how quickly you should move to the optimal and what actions to take (recap versus taking projects), drawing largely on numbers that we have estimated already for the company (Jensen's alpha, ROC - Cost of capital). We then followed up by examining the process of finding the right debt for your firm, with a single overriding principle: that the cash flows on your debt should be matched up, as best as you can, to the cash flows on your assets. The perfect security will combine the tax benefits of debt with the flexibility of equity.Slides: http://www.stern.nyu.edu/~adamodar/podcasts/cfspr17/session20.pdfPost class test: http://www.stern.nyu.edu/~adamodar/pdfiles/cfovhds/postclass/session20test.pdfPost class test solution: http://www.stern.nyu.edu/~adamodar/pdfiles/cfovhds/postclass/session20soln.pdf Learn more about your ad choices. Visit megaphone.fm/adchoices

In this session, I first look back at equities in 2022, focusing on the S&P 500 and put the year (and its negative returns) in historical perspective. I then move on to looking at how the year's price movement has affected expected returns on stocks, where a combination of rising riskfree rates and equity risk premiums have pushed up expected returns to levels not seen in 25 years. Those expected returns become costs of equity for companies, with new investments needing to pass higher hurdles to be good investments. I end the session with a market consensus valuation of the S&P 500, together with valuations as a function of your views on inflation and the economy this year.(If you have trouble with downloads, please try a different browser...)Blog Post: https://aswathdamodaran.blogspot.com/2023/01/data-update-2-for-2023-rocky-year-for.htmlSlides: https://pages.stern.nyu.edu/~adamodar/pdfiles/blog/DataUpdate2for2023.pdfHistorical Returns on Stocks, Bonds, Bills & Other Assets from 1928 to 2022: https://pages.stern.nyu.edu/~adamodar/pc/datasets/histretSP.xlsxHistorical Implied Equity Risk Premiums for US from 1960 to 2022: https://pages.stern.nyu.edu/~adamodar/pc/datasets/histimpl.xlsSpreadsheet to estimate implied ERP: https://pages.stern.nyu.edu/~adamodar/pc/implprem/ERPJan23.xlsxSpreadsheet to value S&P 500:https://pages.stern.nyu.edu/~adamodar/pc/blog/S&P500ValueJan2023.xlsx Learn more about your ad choices. Visit megaphone.fm/adchoices

In this session, we closed the book on relative valuation by looking at how to pick the "right" multiple for a valuation, with the answers ranging from cynically picking one that best fits your agenda to picking one that reflects what managers in that business care about. It is amazing how widespread relative valuation is. I found this link recently on rules of thumb in valuation. http://www.bizstats.com/reports/valuation-rule-thumb.phpWe then moved on to asset based valuation: liquidation valuation, accounting valuation and sum of the parts valuation. Specifically, we focused on when it makes sense to value a company by valuing its assets and what pitfalls to avoid. We ended the class by starting on a discussion of what makes private company valuation tricky, i.e., the absence of a market price, the opacity and unevenness of financial statements and how motive can affect valuation and we will continue with this discussion in the next session.Start of the class test: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/tests/assetvaluation.pdfSlides: http://www.stern.nyu.edu/~adamodar/podcasts/valUGspr17/session21.pdfPost class test: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session21Btest.pdfPost class test solution: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session21Bsoln.pdf Learn more about your ad choices. Visit megaphone.fm/adchoices

In this session, I started by laying out the broad themes for the class - that valuation is a craft, that value is different from price, that a good valuation links story to numbers and that acting on valuation requires faith. I followed up by setting up the logistics of the class, including the quizzes and exams that will be used to grade the class. (For some reason peculiar to Zoom, the slides don't show up for the first ten minutes of class, but they are in the start of the class link. The rest of the class should match the slides.... Sorry!)Start of the class test: https://pages.stern.nyu.edu/~adamodar/pdfiles/eqnotes/tests/firstclass.pdfSlides: https://pages.stern.nyu.edu/~adamodar/pdfiles/eqnotes/eqUGsyllspr23.pdfPost class test: https://pages.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session1test.pdfPost class test: https://pages.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session1soln.pdf Learn more about your ad choices. Visit megaphone.fm/adchoices

In today’s class, we continued our discussion of the cost of capital approach to optimizing debt ratios by first looking at enhancements to the approach and then at the determinants of the optimal. In particular, it was differences in tax rates, cash flows (as a percent of value) and risk that determined why some companies have high optimal debt ratios and why some have low or no debt capacity. We then looked at the Adjusted Present Value (APV) approach to analyzing the effect of debt. In particular, this approach looks at the primary benefit of debt (taxes) and the primary costs (expected bankruptcy) and netted out the difference from the unlevered firm value.. We closed the discussion of optimal by noting that many firms decide how much to borrow by looking their peer group and argued that if you decide to go this route, you should use more of the information than just the average.Slides: http://www.stern.nyu.edu/~adamodar/podcasts/cfspr17/session19.pdfPost class test: http://www.stern.nyu.edu/~adamodar/pdfiles/cfovhds/postclass/session19test.pdfPost class test solution: http://www.stern.nyu.edu/~adamodar/pdfiles/cfovhds/postclass/session19soln.pdf Learn more about your ad choices. Visit megaphone.fm/adchoices

Today's class started with a test on whether you can detect the direction bias will take, based on who or why a valuation is done. The solutions are posted online on the webcast page for the class. We then moved on to talk about the three basic approaches to valuation: discounted cash flow valuation, where you estimate the intrinsic value of an asset, relative valuation, where you value an asset based on the pricing of similar assets and option pricing valuation, where you apply option pricing to value businesses. With discounted cash flow valuation, we started on the assessment phase by looking at its advantages (business understanding, cash flows to back you up) and disadvantages,. We will be starting on the first lecture note packet on Monday. So, please print off the packet or download it to your digital device and bring it to class. Start of the class test: https://pages.stern.nyu.edu/~adamodar/pdfiles/eqnotes/tests/biasshort.pdfSlides: https://pages.stern.nyu.edu/~adamodar/pdfiles/eqnotes/eqprojspr23.pdf & https://pages.stern.nyu.edu/~adamodar/pdfiles/eqnotes/ValIntroSpr23.pdfPost class test: https://pages.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session2atest.pdfPost class test: https://pages.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session2asoln.pdf Learn more about your ad choices. Visit megaphone.fm/adchoices

In this class, we extended our discussion of pricing by looking at how to use pricing to analyze young companies, where multiples are often difficult to apply. We then extended the analysis of pricing by looking at entire markets. In the process, we looked at how multiple regressions can be used and misused to make pricing judgments. If you are interested in seeing the updated numbers for January 2017, you can get them here:http://people.stern.nyu.edu/adamodar/New_Home_Page/datafile/MReg17.htmlStart of the class test: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/tests/relval3atest.pdfSlides: http://www.stern.nyu.edu/~adamodar/podcasts/valUGspr17/session20.pdfPost class test: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session20Ctest.pdfPost class test solution: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session20Csoln.pdf Learn more about your ad choices. Visit megaphone.fm/adchoices

I have valued Tesla multiple times over the last decade, but my most recent valuation of the company was in November 2021, just as it's market cap crested $1 trillion and the stock was trading at $1200+ a share ($400 in current share count terms). I valued the company at about $576/share, and noted that even with my optimistic assumptions for revenues and margins, I could not get the value to the pricing. In the last year, the market has turned for Tesla, and I revalue the company, with updated information on the company, its founder/CEO and the market. While my overall market, margins and reinvestment assumptions have not only not changed, but been reaffirmed by Tesla's operating results in 2022, the value per share that I get is $130, about 10% below the price at close of trading on Jan 25, 2023. The stock is slightly overvalued, and perhaps more so after today's post earnings jump in its price, but it is in play. More generally, I use the Tesla valuation to talk about the dangers of tying companies to personalities, how some companies may evade the laws of business for a while, before it catches up with them, and the very real issue of how political is permeating investing and business. Put simply, it is very likely that those who agree (disagree) politically with Musk are now more likely to Tesla bulls (bears).(If you have trouble downloading, please switch browsers...)Slides: https://pages.stern.nyu.edu/~adamodar/pdfiles/blog/TeslaJan2023.pdfBlog Post: https://aswathdamodaran.blogspot.com/2023/01/tesla-in-2023-return-to-reality-start.htmlValuation of Tesla on Jan 25, 2023: https://pages.stern.nyu.edu/~adamodar/pc/blog/TeslaJan2023DIY.xlsx Learn more about your ad choices. Visit megaphone.fm/adchoices

In this class, we continued our discussion of the cost of capital approach to deriving an optimal financing mix: the optimal one is the debt ratio that minimizes the cost of capital. To estimate the cost of capital at different debt ratios, we estimated the levered beta/ cost of equity at each debt ratio first and then the interest coverage ratio/synthetic rating/cost of debt at each debt ratio, taking care to ensure that if the interest expenses exceeded the operating income, tax benefits would be lost. The optimal debt ratio is the point at which your cost of capital is minimized. Using this approach, we estimated optimal debt ratios for Disney (40%), Tata Motors (20%), Vale (30% with actual earnings, 50% with normalized earnings). Disney was underlevered and Tata Motors was over levered. Slides: http://www.stern.nyu.edu/~adamodar/podcasts/cfspr17/session18.pdfPost class test: http://www.stern.nyu.edu/~adamodar/pdfiles/cfovhds/postclass/session18test.pdfPost class test solution: http://www.stern.nyu.edu/~adamodar/pdfiles/cfovhds/postclass/session18soln.pdf Learn more about your ad choices. Visit megaphone.fm/adchoices

In this session, I laid out the structure for the class and an agenda of what I hope to accomplish during the next 15 weeks. In addition to describing the logistical details, I presented my view that corporate finance is the ultimate big picture class because everything falls under its purview. The “big picture” of corporate finance covers the three basic decisions that every business has to make: how to allocate scarce funds across competing uses (the investment decision), how to raise funds to finance these investments (the financing decision) and how much cash to take out of the business (the dividend decision). The singular objective in corporate finance is to maximize the value of the business to its owners. This big picture was then used to emphasize five themes: that corporate finance is common sense, that it is focused, that the focus shifts over the life cycle and that you cannot break first principles with immunity.Slides: https://pages.stern.nyu.edu/~adamodar/pdfiles/cfovhds/cfsyllspr23.pdfPost class test: https://pages.stern.nyu.edu/~adamodar/pdfiles/cfovhds/postclass/session1test.pdfPost class test solution: https://pages.stern.nyu.edu/~adamodar/pdfiles/cfovhds/postclass/session1soln.pdf Learn more about your ad choices. Visit megaphone.fm/adchoices

In this session, we extended the discussion of the analysis of multiples by looking at PEG ratios, EV multiples and book value multiples. Each multiple, we argued, has a driver and companion variable.We then moved on to application and how best to find comparable firms and control for differences. At this point, you have the tools you need to price just about any stock (or asset). Remember that you are paying to heed to the market, controlling for differences as much as you can and hoping that pricing divergences disappear over time.Start of the class test: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/tests/relval2atest.pdfSlides: http://www.stern.nyu.edu/~adamodar/podcasts/valUGspr17/session19.pdfPost class test: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session19Ctest.pdfPost class test solution: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session19Csoln.pdf Learn more about your ad choices. Visit megaphone.fm/adchoices

If 2022 was a bad year for stocks, and it was, it was an even worse year for bond investors. On US treasury bonds, a traditional safe investment, the rise in T.Bond rates translates into double digit drops in prices, with the ten-year T.Bond registering at -17.83% return, the worse year in the 1928-2022 time period that I track. With corporate bonds, the damage was worsened by rising default spreads, especially at lower ratings classes. Overall, 2022 was the first year in the 95 years of annual returns, where both stocks and bonds had double digit negative returns. The rising cost of corporate debt, combined with a rising cost of equity, pushed up the costs of capital for companies significantly, with consequences for investing, financing and dividend decisions. Looking forward to 2023, it will not be the Fed that drives interest rates, but what happens to inflation and the economy.Slides: https://pages.stern.nyu.edu/~adamodar/pdfiles/blog/DataUpdate3for2023.pdfBlog Post: https://aswathdamodaran.blogspot.com/2023/01/data-update-3-for-2023-inflation-and.html Learn more about your ad choices. Visit megaphone.fm/adchoices

In the shortened session that followed the quiz, I look at the Miller Modigliani theorem through the prism of the debt tradeoff. I then move on to looking at how the cost of capital can be used to optimize the right mix of debt and equity. We will continue with this discussion next week. Until next time!Slides: http://www.stern.nyu.edu/~adamodar/podcasts/cfspr17/session17.pdfPost class test: http://www.stern.nyu.edu/~adamodar/pdfiles/cfovhds/postclass/session17Atest.pdf Learn more about your ad choices. Visit megaphone.fm/adchoices

Bringing in the effects of uncertainty and complexity, I argued that these three (bias, uncertainty and complexity) forces are the biggest challenges to good valuation.We then moved on to talk about the three basic approaches to valuation: discounted cash flow valuation, where you estimate the intrinsic value of an asset, relative valuation, where you value an asset based on the pricing of similar assets and option pricing valuation, where you apply option pricing to value businesses. With each approach, we talked about the types of assets that are best priced with that approach and what you need to bring as an analyst/investor to the table. For instance, in our discussion of DCF valuation and how to make it work for you, I suggested that there were two requirements: a long time horizon and the capacity to act as the catalyst for market correction.Start of the class test: https://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/tests/biasshort.pdfSlidesIntroduction to Valuation: https://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/ValIntroSpr23.pdfPost class test:https://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session2atest.pdfPost class test solution: https://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session2asoln.pdf Learn more about your ad choices. Visit megaphone.fm/adchoices

Last week, I valued Tesla and arrived at an estimate of value, which at $130 was fairly close to the price then, but looks distant as the stock has run up in the week since. I expected that I would hear back from people who disagreed with me, and I did, on both sides. That disagreement not only does not bother me, but I think is healthy, and I am not in the least bit defensive. But as a teacher, there are learning moments and teaching moments and I look at some of them in this debate, in the context of explaining why I told the story that I did and arrived at the value that I did, in my valuation. I fill in missing pieces in the valuation, and examine the critiques from both Tesla bulls (that my revenues and margins are too low, that I am missing the potential from other businesses and the specialness of the company & its founders) and Tesla bears. I close by noting that I value companies for myself, and that if you are a Tesla bull or a bear, it is not my valuation that you should be worried about, but your own.Slides: https://pages.stern.nyu.edu/~adamodar/pdfiles/blog/TeslaPushback2023.pdfBlog Post: https://aswathdamodaran.blogspot.com/2023/02/disagreements-and-first-principles.html Learn more about your ad choices. Visit megaphone.fm/adchoices

The India Rising Story hit a road block last week, when Hindenburg Research, a short seller, labeled the Adani Group, one of India's largest, fastest-rising and most politically connected family groups, as the "largest con" in corporate history. I have no financial or emotional investment in the Adani Group, and in this session, I start by providing a short history of how a obscure, regional family group company became one of India's largest family group companies, commanding a market capitalization in excess of $200 billion at the start of 2022. I trace its growth in revenues from infrastructure businesses, accompanies by slim profits, huge investments and lots of debt. I try to consolidate the Hindenburg critique of the company into three groupings - that it is committing accounting fraud, that it is manipulating stock prices and that Indian institutions (banks, regulators, LIC) are staying on the sidelines. Rather than call it a "big con", I am inclined to believe that this is a company that is exploiting the seams and weaknesses in the India story, from the obsessive focus on control in many of its family groups to the inertia and indifferences at institutions to misplaced priorities at regulators to the dominance of bullish momentum-based trading in markets. I close with a valuation of Adani Enterprises, the Group's holding company, and find it over valued, even after the mark down in prices last week.Slides: https://pages.stern.nyu.edu/~adamodar/pdfiles/blog/AdaniShort.pdfValuation of Adani: https://pages.stern.nyu.edu/~adamodar/pc/blog/Adani2023.xlsx Learn more about your ad choices. Visit megaphone.fm/adchoices

I first valued Valeant in November 2015, after its fall from grace, and concluded that it was not a good investment then, but I did return to it in April 2016 and November 2016, and each time, found it under valued & bought the stock. In March 2017, my investment in the stock has lost 50% of its value. Part of me wants to go into denial (and not look at the stock), part of me wants to sell and never talk about it but I know that for my investment health, I need to take a look at the company and reassess whether it belongs in my portfolio at today's price. I attempt to do so, though it entirely possible that I am letting my delusions get the better of my good sense.Slides: http://www.stern.nyu.edu/~adamodar/pdfiles/blog/ValeatMarch2017.pdfBlog Post:Valuation: http://www.stern.nyu.edu/~adamodar/pc/blog/ValeantMarch2017.xls Learn more about your ad choices. Visit megaphone.fm/adchoices

In this session, I complete my discussion of my global data update for 2017 by looking at pricing differences across countries and sectors. Specifically, I look at how PE ratios, PBV ratios, EV to EBITDA and EV to Sales vary across markets. Slides: http://www.stern.nyu.edu/~adamodar/pdfiles/blog/dataupdate10.pdfBlog Post: http://aswathdamodaran.blogspot.com/2017/03/january-2017-data-update-10-pricing-game.htmlData on Pricing by Country: http://www.stern.nyu.edu/~adamodar/pc/blog/CountryMultiples2017.xlsxData on Pricing by Sector: http://www.stern.nyu.edu/~adamodar/pc/blog/SectorMultiples2017.xlsx Learn more about your ad choices. Visit megaphone.fm/adchoices

A good company can be badly managed and a bad company can be well managed. To make things even more confusing, a bad company with inept management can be a good investment. If this all sounds like a riddle to you, try this webcast where I draw the distinction between a good company, a good management and a good investment.Slides: http://www.stern.nyu.edu/~adamodar/pdfiles/blog/goodbad.pdfBlog Post: http://aswathdamodaran.blogspot.com/2017/03/explaining-paradox-why-good-bad.html Learn more about your ad choices. Visit megaphone.fm/adchoices

This is not a video that I expect most of you to not watch, for many reasons. First, it is insanely long (more than 3 hours), breaking almost every rule in the online video rulebook. Second, everything that I say in this video, I have said before either in my classes or individual posts. That said, you may still find it useful because it consolidates all the arguments against three ideas that I have seen marketed relentlessly as counters to conventional business first principles, and shows how these concepts connect to each other. 1. Sustainability: It is the business buzzword of the moment, with sustainability centers funded around the idea and classes with it in the title. While I understand the push for sustainable living and a planet, I find the notion of corporate sustainability nonsensical, since corporations are legal entities that should go away, when their reason for existence disappears. 2. Stakeholder Wealth Maximization: Should a well run business consider the needs and interests of the many stakeholders in it (lenders, employees, customers, society)? Of course, but the idea that you can maximize all of their competing interests is an idea that only a law school professor will think is a good one.3. ESG: No business acronym has ever acquired as large a following as this one, and I have written and talked about the multiple ways in which it can go wrong. My description of ESG as a concept born in sanctimony, nurtured in hypocrisy and sold with sophistry summarizes how I feel about it.I use "Theocratic" to bind these bad ideas together because they have marketed with religious fervor, and the Ayatollahs of the space have used virtue (or their definitions of it) as a defense against arguments. The buy in by consultants (McKinsey, are you listening), academics (who have provided cover and manufactured research to back it up), fund managers (with fiduciary responsibilities) has been astonishing. If you are an ESG advocate, or worse still, actually work in the space, I hope that you do get a chance to watch the session. It may infuriate you, and you may disagree with my arguments, but I don't think you will find it boring.Slides: https://pages.stern.nyu.edu/~adamodar/pdfiles/blog/TheoTrifecta.pdfPrevious blog posts:1. https://aswathdamodaran.blogspot.com/2019/08/from-shareholder-wealth-to-stakeholder.html2. https://aswathdamodaran.blogspot.com/2020/09/sounding-good-or-doing-good-skeptical.html3. https://aswathdamodaran.blogspot.com/2021/09/the-esg-movement-goodness-gravy-train.html4. https://aswathdamodaran.blogspot.com/2022/03/esgs-russia-test-moment-to-shine-or.html Learn more about your ad choices. Visit megaphone.fm/adchoices

(I apologize for the screen sharing snafu, which is about 12 minutes, between minutes 10 and 22 of the class, since you watch an awfully low res video of me in front of the classroom). In the session today, we started by doing a brief test on country risk premiums. We started with an assessment of historical equity risk premiums, and why they are not good predictors of future equity risk premiums, before embarking on a discussion of country risk and how to deal with it, and measure it. We also looked at company risk exposure to country risk, with my core argument being that a company’s exposure to country risk comes from where it dos business, not where it is incorporated:After a brief foray into lambda, a more composite way of measuring country risk, we spent the rest of the session talking about the dynamics of implied equity risk premiums and what makes them go up, down or stay unchanged. We then moved to cross market comparisons, first by comparing the ERP to bond default spreads, then bringing in real estate risk premiums and then extending the concept to comparing ERPs across countries. Finally, I made the argument that you should not stray too far from the current implied premium, when valuing individual companies, because doing so will make your end valuation a function of what you think about the market and the company. If you have strong views on the market being over valued or under valued, it is best to separate it from your company valuation. I am attaching the excel spreadsheet that I used to compute the implied ERP at the start of February 2023. Play with it when you get a chance. Post class test and solution attached. Until next time!Start of the class test: https://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/tests/ImplPrem.pdfERP for February 2023: https://pages.stern.nyu.edu/~adamodar/pc/implprem/ERPFeb23.xlsxSlides: https://www.stern.nyu.edu/~adamodar/podcasts/valspr23/session5slides.pdfPost class test: https://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session5Atest.pdfPost class test solution: https://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session5Asoln.pdf Learn more about your ad choices. Visit megaphone.fm/adchoices

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In this class we began by looking at the four rules that keep terminal value in check. We then looked at which model to use in valuing a company and then moved on to the loose ends in valuation, items we often pay little heed to or attach arbitrary premiums/discounts for. We began by looking at cash and whether it should command a premium at some companies (if they have a good track record and have restrictions on raising capital) and a discount at others (if investors don't trust you with the cash). We then looked at cross holdings in other companies and the numerous barriers to valuing them.Start of the class test: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/tests/termvalue.pdfSlides: http://www.stern.nyu.edu/~adamodar/podcasts/valUGspr17/session11.pdfPost class test: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session11atest.pdfPost class test solution: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session11asoln.pdf Learn more about your ad choices. Visit megaphone.fm/adchoices

We started this class by tying up the last loose ends with risk and return models, talking about how assuming that there are no transactions costs and private information can lead us all to hold the market portfolio, and how risk can be then measured as risk added to that portfolio. We did damn the CAPM with faint praise, arguing that it does not do very well at explaining differences in returns across companies, but that it does at least as well as the alternatives. We then started on the mechanics of the model, taking about risk free rates: how to estimate the risk free rate in a currency where there is no default free entity issuing bonds in that currency and why risk free rates vary across currencies. The key lesson is that much as we would like to believe that riskfree rates are set by banks, they come from fundamentals - growth and inflation. I have a post on risk free rates that you might find of use:http://aswathdamodaran.blogspot.com/2015/04/dealing-with-low-interest-rates.html In fact, risk free rates turned negative in a few currencies, upending what we know about risk free rates in. Here is my post on negative risk free rates.http://aswathdamodaran.blogspot.com/2016/03/negative-interest-rates-unreal.html In the final few minutes of the session, we turned to equity risk premiums and how they are related to risk aversion.Slides: https://pages.stern.nyu.edu/~adamodar/podcasts/cfspr23/session6slides.pdfPost class test: https://pages.stern.nyu.edu/~adamodar/pdfiles/cfovhds/postclass/session6atest.pdfPost class test solution: https://pages.stern.nyu.edu/~adamodar/pdfiles/cfovhds/postclass/session6asoln.pdf Learn more about your ad choices. Visit megaphone.fm/adchoices

This session is a grind with numbers building on top of numbers. In specific, we looked at how to estimate the beta for not only a company but its individual businesses by building up to a beta, rather than trusting a single regression. With Disney, we estimated a beta for each of the five businesses it was in, a collective beta for Disney's operating businesses and a beta for Disney as a company (including its cash). If you got lost at some stage in the class, here are some of the ways you can get unlost:1. Review the slides that we covered today.2. Try the post-class test and solution. I think it will really help bring together some of the mechanical issues involved in estimating betas.3. Read this short Q&A on bottom up betas which highlights the estimation process and some of its pitfalls:http://www.stern.nyu.edu/~adamodar/New_Home_Page/TenQs/TenQsBottomupBetas.htmSlides: http://www.stern.nyu.edu/~adamodar/podcasts/cfspr17/session9.pdfPost class test: http://www.stern.nyu.edu/~adamodar/pdfiles/cfovhds/postclass/session9test.pdfPost class test solution: http://www.stern.nyu.edu/~adamodar/pdfiles/cfovhds/postclass/session9soln.pdf Learn more about your ad choices. Visit megaphone.fm/adchoices

In this session, after a brief mop-up on why it is dangerous to deviate too much from the implied ERP, we talked about betas. In particular, we noted that estimating a beta by running a regression against a market index can yield junk, and we talked about alternatives. Some of these alternatives are built around estimating risk using something other than prices, and some are built around looking at total risk. We did end the session with ttalk about bottom up betas, focusing on defining comparable firms and expanding the sample. I did make a big deal about bottom up betas, but may have still not convinced you or left you hazy about some of the details. If so, I thought it might be simpler to just send you a document that I put together on the top ten questions that you may have or get asked about bottom up betas. I think it covers pretty much all of the mechanics of the estimation process, but I am sure that I have missed a few things.http://www.stern.nyu.edu/~adamodar/New_Home_Page/TenQs/TenQsBottomupBetas.htmStart of the class test: https://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/tests/betanew.pdfSlides: https://www.stern.nyu.edu/~adamodar/podcasts/valspr23/session6slides.pdfPost class test: https://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session6test.pdfPost class test solution: https://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session6soln.pdf Learn more about your ad choices. Visit megaphone.fm/adchoices

The first 30 minutes of this session was a quiz. We then continued our discussion of growth by the fundamentals that drive growth. In particular, we looked at how much efficiency can add to growth and how to estimate growth in companies with negative earningsSlides: http://www.stern.nyu.edu/~adamodar/podcasts/valUGspr17/session10.pdfPost class test: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session10atest.pdfPost class test solution: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session10asoln.pdf Learn more about your ad choices. Visit megaphone.fm/adchoices

Intros class, we started debt ratios for companies and how to deal with hybrid securities.. If you are interested in getting updated default spreads (on the cheap or free), try the Federal Reserve site in St. Louis:https://fred.stlouisfed.orgThese are spreads on indices created by rating, updated daily. Neat, right? We started on our discussion of cash flows, by laying out the big differences between earnings and cash flows, and why getting earnings updated and cleaned up is a necessary first step. In particular, we went through the process of converting an operating expense (like leases used to be pre-2019 into a financial expense.Start of the class test: https://pages.stern.nyu.edu/~adamodar/pdfiles/eqnotes/tests/cftests.pdfSlides: https://pages.stern.nyu.edu/~adamodar/podcasts/valUGspr23/session8slides.pdfPost class test: https://pages.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session8Btest.pdfPost class test: https://pages.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session8Bsoln.pdf Learn more about your ad choices. Visit megaphone.fm/adchoices

We spent most of this class talking about the determinants of betas. Before we do that, though, there is one point worth emphasizing. Betas measure only non-diversifiable or market risk and not total risk (explaining why Harmony can have a negative beta and Philip Morris a very low beta).1. Betas are determined in large part by the nature of your business. While I am not an expert on strategy, marketing or productions, decisions that you make in those disciplines can affect your beta. Thus, your decision to go for a price leader as opposed to a cost leader (I hope I am getting my erminology right) or build up a brand name has implications for your beta. As some of you probably realized today, the discussion about whether your product or service is discretionary is tied to the elasticity of its demand (an Econ 101 concept that turns out to have value)... Products and services with elastic demand should have higher betas than products with inelastic demand. And if you do get a chance, try to make that walk down Fifth Avenue...2. Your cost structure matters. The more fixed costs you have as a firm, the more sensitive your operating income becomes to changes in your revenues. To see why, consider two firms with very different cost structures Firm A Firm BRevenues 100 100- Fixed costs 90 0- Variable costs 0 90Operating income 10 10Consider what will happen if revenues rise 10%. The first firm will see its operating income increase to 20 (an increase of 100%) whereas the second firm will see its operating income go up to 11 (an increase of 10%)... that is why looking at percentage change in operating income/percentage change in revenues is a measure of operating leverage.3. Financial leverage: When you borrow money, you create a fixed cost (interest expenses) that makes your equity earnings more volatile. Thus, the equity beta in a safe business can be outlandishly high if has lots of debt. The levered beta equation we went through is a staple for this class and we will revisit it again and again. So, start getting comfortable with it. I also introduced the notion of betas being weighted averages with the Disney - Cap Cities example. I worked out the beta for Disney under two scenarios: an all-equity funded acquisition of Cap Cities and their $10 billion debt/ $8.5 billion equity acquisition. As an exercise, please try to work out the levered beta for Disney on the assumption that they funded the entire acquisition with debt (all $18.5 billion).Slides: http://www.stern.nyu.edu/~adamodar/podcasts/cfspr17/session8.pdfPost class test: http://www.stern.nyu.edu/~adamodar/pdfiles/cfovhds/postclass/session8test.pdfPost class test solution: http://www.stern.nyu.edu/~adamodar/pdfiles/cfovhds/postclass/session8soln.pdf Learn more about your ad choices. Visit megaphone.fm/adchoices

One of the lessons relearned in 2022 was that the end game of any business, no matter what its potential and how many users it has, is to make money. In this session, I draw a distinction between different profit measures from gross to operating to net profit, and how the test of making money gets more difficult as you move down the income statement.. I scale profits to revenues to estimate margins, and examine the distribution of margins, and differences across geographies and industries. I look at accounting returns, standing alone, and relative to the costs of raising capital to conclude that in 2022, about 70% of all publicly traded firms earned less than their costs of equity (capital), some for good reasons, but many for bad ones. Slides: https://pages.stern.nyu.edu/~adamodar/pdfiles/blog/DataUpdate5for2023.pdfPost: https://aswathdamodaran.blogspot.com/2023/02/data-update-5-for-2023-earnings-test.html Learn more about your ad choices. Visit megaphone.fm/adchoices

Learn more about your ad choices. Visit megaphone.fm/adchoices

Learn more about your ad choices. Visit megaphone.fm/adchoices

This class covered the conventional approach to estimating betas, which is to run a regression of returns on a stock against returns on the market index. We first covered the estimation choices: how far back in time to go (depends on how much your company has changed), what return interval to use (weekly or monthly are better than daily), what to include in returns (dividends and price appreciation) and the market index to use (broader and wider is better). We also looked at the three key pieces of output from the regression:1. The intercept: This is a measure of how good or bad an investment your stock was during the period of your regression. To compute the measure correctly, you net out Rf(1-Beta) from the Intercept:Jensen's alpha = Intercept - Riskfree rate (1- Beta)If this number is a positive (negative) number, your stock did better (worse) than expected, after adjusting for risk and market performance.2. The slope: is the beta, albeit with standard error3. The R squared: measures the proportion of the risk in your stock that is market risk, with the balance being firm specific/diversifiable risk.Finally, we used the beta to come up with an expected return for stock investors/cost of equity for the company. Slides: http://www.stern.nyu.edu/~adamodar/podcasts/cfspr17/session7.pdfPost class test: http://www.stern.nyu.edu/~adamodar/pdfiles/cfovhds/postclass/session7test.pdfPost class test solution: http://www.stern.nyu.edu/~adamodar/pdfiles/cfovhds/postclass/session7soln.pdf Learn more about your ad choices. Visit megaphone.fm/adchoices

In this class, we started with the cost of debt and computing debt ratios for companies and how to deal with hybrid securities.. If you are interested in getting updated default spreads (on the cheap or free), try this site:https://content.naic.org/search?q=default+spreads&btnG.x=0&btnG.y=0#gsc.tab=0&gsc.q=default%20spreads&gsc.page=1While that link will give you end spreads, they do update the numbers monthly, but seem to do an awfully poor job of making the spreadsheet findable. You can also try the St. Louis FRED and find updated on seven major ratings classes (AAA, AA, A, BBB, BB, B, C and lower) updated daily. Neat, right? You can get the spreads from Bloomberg as well, using the FIW function, and tweaking the choices to show all corporate spreads.We then moved on to getting the base year's earnings right and explored several issues:1. To get updated numbers, you should be using either trailing 12 month numbers or complete the current year with forecasted numbers. In either case, your objective should be to get the most updated numbers you can for each input rather than be consistent about timing.2. To clean up earnings, you have to correct accounting two biggest problems: the treatment of operating leases as operating (instead of financial) expenses and the categorization of R&D as operating (instead of capital) expenses. The biggest reason for making these corrections is to get a better sense of how much capital has been invested in the business and how much return this capital is generating.Start of the class test: https://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/tests/cftests.pdfSlides: https://www.stern.nyu.edu/~adamodar/podcasts/valspr23/session7slides.pdfPost class test: https://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session7test.pdfPost class test solution: https://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session7soln.pdf Learn more about your ad choices. Visit megaphone.fm/adchoices

Toward the end of 2016, Snap (formerly known as Snapchat) became the latest of the social media companies to enter the public market. With 161 million engaged users but little in terms of current revenues & big operating losses, Snap fills the bill as a company with lots of potential but plenty of peril. In this post, I tell my story for Snap and the value that emerges from it. It is, for the most part, an optimistic story of a young company that has found a niche in the crowded social media space. In my story, Snap will not and should not try to be the next Facebook but I also see it as avoiding becoming Twitter Redux. Tell your own story and make your storyline into a value!Slides: http://www.stern.nyu.edu/~adamodar/pdfiles/blog/SnapIPO.pdfBlog Post: http://aswathdamodaran.blogspot.com/2017/02/a-snap-story-valuing-snap-ahead-of-its.htmlLinksSnap Prospectus:https://www.sec.gov/Archives/edgar/data/1564408/000119312517029199/d270216ds1.htmSnap IPO valuation (my base story): http://www.stern.nyu.edu/~adamodar/pc/blog/SnapIPOFeb2017.xlsSnap as Facebook Light: http://www.stern.nyu.edu/~adamodar/pc/blog/SnapFacebookLite.xlsSnap as Twitter Redux:http://www.stern.nyu.edu/~adamodar/pc/blog/SnapTwitterredux.xlsSnap Simulation: http://www.stern.nyu.edu/~adamodar/pc/blog/SnapSimulation.pdf Learn more about your ad choices. Visit megaphone.fm/adchoices

In this session, we began by looking at broad definitions of cash flows, before embarking on updating, normalizing and cleaning up accounting earnings. In particular, we talked about why we capitalize lease commitments and R&D expenses, and how they affect valuation inputs. We continued our discussion of cash flows, by first putting to rest some final issues on earnings, including the tax rate to use in computing after-tax cash flows and dealing with money losing companies. In the process, we did look at what to do about accounting fraud, and while the answer is not much, there may be a role for forensic accounting. To be honest, most forensic accounting books are designed for valuation morticians, but here are a couple that you may find useful:1. http://www.amazon.com/Financial-Shenanigans-Accounting-Gimmicks-Reports/dp/0071703071/ref=pd_sim_b_8 2. http://www.amazon.com/Creative-Cash-Flow-Reporting-Sustainable/dp/0471469181/ref=pd_sim_b_2Start of the class test: https://pages.stern.nyu.edu/~adamodar/pdfiles/eqnotes/tests/cftests2.pdfSlides: https://pages.stern.nyu.edu/~adamodar/podcasts/valUGspr23/session9slides.pdfPost class test: https://pages.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session9Atest.pdfPost class test: https://pages.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session9Asoln.pdf Learn more about your ad choices. Visit megaphone.fm/adchoices

When funding a business, you can use either borrowed money (debt) or your own money (equity). In this session, I by starting by looking at the trade offs, both real and illusory, that determine the right mix of debt and equity for a business, and use the cost of capital as an optimizing tool to determine the right mix of debt and equity. (I use it to go back and look at whether Adani Group is over levered.). I then turn to the corporate use of debt in 2022, examining the distribution of debt to capital (gross & net, book and market) ratios around the world, with regional differences. I also look at interest coverage ratios and debt to EBITDA differences across companies and sectors, before closing with an assessment of what 2023 will bring in terms of debt troubles and defaults.Slides: https://pages.stern.nyu.edu/~adamodar/pdfiles/blog/DataUpdate6for2023.pdfDatasets:1. Debt fundamentals, by industry group (US): https://pages.stern.nyu.edu/~adamodar/pc/datasets/dbtfund.xls2. Debt fundamentals, by industry group (Global): https://pages.stern.nyu.edu/~adamodar/pc/datasets/dbtfundGlobal.xlsSpreadsheets:1. Capital Structure Optimization spreadsheet: https://pages.stern.nyu.edu/~adamodar/pc/capstru.xlsx2. Adani Enterprises Optimum Financing Mix: https://pages.stern.nyu.edu/~adamodar/pc/blog/AdaniCapStru.xlsx3. Adani Group Optimum Financing Mix: https://pages.stern.nyu.edu/~adamodar/pc/blog/AdaniGroupCapStru.xlsx Learn more about your ad choices. Visit megaphone.fm/adchoices

In today’s class, we started with computing debt ratios for companies and how to deal with hybrid securities.. If you are interested in getting updated default spreads (on the cheap or free), try the Federal Reserve site in St. Louis:https://fred.stlouisfed.org/categories/32297These are spreads on indices created by rating, updated daily. Neat, right? We then moved on to getting the base year's earnings right and explored several issues:1. To get updated numbers, you should be using either trailing 12 month numbers or complete the current year with forecasted numbers. In either case, your objective should be to get the most updated numbers you can for each input rather than be consistent about timing.2. To clean up earnings, you have to correct accounting two biggest problems: the treatment of operating leases as operating (instead of financial) expenses and the categorization of R&D as operating (instead of capital) expenses. The biggest reason for making these corrections is to get a better sense of how much capital has been invested in the business and how much return this capital is generating.Start of the class test: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/tests/cftests.pdfSlides: http://www.stern.nyu.edu/~adamodar/podcasts/valUGspr17/session7.pdfPost class test: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session7test.pdfPost class test solution: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session7soln.pdf Learn more about your ad choices. Visit megaphone.fm/adchoices

We continued our discussion of cash flows, by first putting to rest some final issues on earnings, including the tax rate to use in computing after-tax cash flows and dealing with money losing companies. In the process, we did look at what to do about accounting fraud, and while the answer is not much, there may be a role for forensic accounting. To be honest, most forensic accounting books are designed for valuation morticians, but here are a couple that you may find useful:http://www.amazon.com/Financial-Shenanigans-Accounting-Gimmicks-Reports/dp/0071703071/ref=pd_sim_b_8http://www.amazon.com/Creative-Cash-Flow-Reporting-Sustainable/dp/0471469181/ref=pd_sim_b_2We then moved on to examine broad questions about what to include in capital expenditures and working capital, before putting the cash flow topic to rest by working out debt cash flows and cash flows to equity. If you are interested, you may find this post that I had on free cash flows useful (with Microsoft as my case study):https://aswathdamodaran.blogspot.com/2022/10/earnings-and-cash-flows-primer-on-free.htmlStart of the class test: https://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/tests/cftests2.pdfSlides: https://www.stern.nyu.edu/~adamodar/podcasts/valspr23/session8slides.pdfPost class test: https://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session8test.pdfPost class test solution: https://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session8soln.pdf Learn more about your ad choices. Visit megaphone.fm/adchoices

In this session, we address the question of what risks get rewarded and which ones do not, by looking diversifiable versus non-diversifiable risk. The best way to understand diversifiable and non-diversifiable risk is to take a company and consider all of the risks that it is exposed to and then categorize these risks into whether they are likely to affect just the company, the company and a few competitors, the entire sector or the overall market. The marginal investor, if diversified, cares and prices in only the last type of risk. In the last part of the class, we introduced the notion of a risk free investment and how to measure the risk free rate.Slides: http://www.stern.nyu.edu/~adamodar/podcasts/cfspr17/session5.pdfPost class test: http://www.stern.nyu.edu/~adamodar/pdfiles/cfovhds/postclass/session5test.pdfPost class test solution: http://www.stern.nyu.edu/~adamodar/pdfiles/cfovhds/postclass/session5soln.pdf Learn more about your ad choices. Visit megaphone.fm/adchoices

The key reason that US equities have held their own this year, in the face of rising interest rates, is a surge in aggregated earnings, which some have attributed to the massive investments in AI cap ex. In this session, I start by updating my market views to October 1, by bringing in September's explosive rise in rates and updating my estimates for expected returns and equity risk premiums for US stocks. I then turn to the real focus of this session, which is looking at how the trillions being invested in AI cap ex are playing through income statements, balance sheets and cash flows for the AI builders (who are spending the money on the AI cap ex) and the suppliers of the AI architecture (chips, networking equipment, power, cooling and real estate. Across all publicly traded firms, AI cap ex has significantly bulked up balance sheets, with both book debt and equity rising, and at least in the aggregate, increased earnings, as the amortization of AI cap at the builders (which lowers earnings) is being swamped by the net income generated by the AI suppliers, from providing the ingredients. In the aggregate, US companies are generating less in free cash flows, and dividends and buybacks are growing far more slowly than earnings. I close with an assessment of the choices we face as investors, as the AI storm roils the waters.Slides: https://pages.stern.nyu.edu/~adamodar/pdfiles/blog/MktandAI2026.pdfBlog post: https://aswathdamodaran.blogspot.com/2026/10/stock-prices-earnings-and-cashflows-ai.html Learn more about your ad choices. Visit megaphone.fm/adchoices

In this session, we started by completing our discussion of FCFE and how it varies over a corporate life cycle, and then looked at three approaches to estimating growth - a historical growth rate, where you look at past growth, outsourcing growth to analysts or managers and sustainable growth, where you tie growth to how much a company is reinvesting and how well it is reinvesting. Ultimately, you have to find the right mix of historical data, industry trends and your assessment of the company in forecasting growth, and letting uncertainty stop you is not an option.Start of the class test: https://pages.stern.nyu.edu/~adamodar/pdfiles/eqnotes/tests/growthrate.pdfSlides: https://pages.stern.nyu.edu/~adamodar/podcasts/valUGspr23/session10slides.pdfPost class test: https://pages.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session10Atest.pdfPost class test: https://pages.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session10Asoln.pdf Learn more about your ad choices. Visit megaphone.fm/adchoices