Session 18: Pricing 101

In this session, we took our first steps on pricing a company, by first contrasting it with value and then looking at its appeal to analysts and investors. We then set up a four step process for breaking down multiples, starting with the definitional tests, where we looked at whether the multiple was consistently defined and uniformly estimated. We followed up by playing Moneyball by looking at the distributions of multiples as a replacement for crude rules of thumb. In the third step, we looked at analyzing multiples, using discounted cash flow models and algebra to extract the variables embedded in each multiple. We will continue with this discussion in the next class.

[DuffyElmer]

I appreciate the lectures, but could you please move the zoom management window out of the way so we can read the powerpoint?

[amittauman]

Hi. At min 35. Why are we counting debt but subtracting cash. Why is debt an operating asset? When compared to ebitda. For example, if we loan to another firm, then our debt would decrease but our ebitda would not change .

[benjaminwen]

Hi Prof. Thank you for your sharing.

I am just curious, how actually Warren Buffett could hold up many of his shares for a long period without succumb to the temptations to sell?

Would you mind sharing insights?

[iAmLavri]

Enterprise Value = Market Value of Equity + Market Value of Debt - Cash. What should we do with Goodwill and intangible assets? Should we remove them as well because it might not really worth a lot?

[DuffyElmer]

It's funny how you can tell she's reciting the lines without understanding them.

[benjaminwen]

Hi Prof. Thank you for your sharing.

I am just curious, how actually Warren Buffett could hold up many of his shares for a long period without succumb to temptations to sell?

Would you mind sharing insights?