This course aims to introduce students to security analysis and valuation from both theoretical and empirical perspectives. Students will be provided with a thorough understanding of alternative methods for equity valuation from the perspective of selecting stocks for investment portfolios, offering new issues for sale (initial public offering) and undertaking decisions for merger & acquisition. An opportunity will also be provided to students to use cases to understand the equity valuation process and apply alternative valuation methods to real-time financial data on business corporations. Major topics include: equity valuation process, return concepts, introduction to industry and company analysis, discounted dividend valuation, free cash flow valuation, market-based valuation; price and enterprise value multiples, residual income valuation and private company valuation.

After completing this course, the student will be able to:

1. Understand equity valuation: applications and processes.
2. Describe different return concepts, industry, company and market analysis for valuing equity and businesses.
3. Have necessary knowledge of alternative valuation models including discounted dividend valuation, free cash flow valuation, residual income valuation and peer valuation models.
4. Demonstrate analytical, computational and critical thinking skills to solve and interpret cases of equity analysis and valuation of different corporate firms.
5. Build cases on equity analysis and valuation using real-life financial data of local business corporations.

1. Equity Valuation: Applications and Processes
2. Return concepts
3. Nike’s case on cost of capital estimation
4. Introduction to industry and company analysis
5. Industry and company analysis
6. Discounted dividend valuation models
7. Fee cash flow valuation models
8. A case on alternative valuation methods for merger & acquisition
9. A case on Netscape IPO
10. Market-Based Valuation: Price and Enterprise Value Multiples
11. A case on Warren E Buffett, 2005
12. Residual income valuation: valuing common equity
13. A case on Coke vs PepsiCo: an application of EVA model
14. Private company valuation

Equity Asset Valuation by Pinto-Henry-Robinson-Stowe (PHRS), 2^nd Edition, John Wiley & Sons, Inc., Hoboken, New Jersey.
Investment Analysis and Portfolio Management by Brown-Reilly (2012), 10^th Edition, South-Western Cengage Learning (RB).

1. Security Analysis and Business Valuation by Jeffrey C Hooke, 2^nd Edition, Wall Street, A Comprehensive Guide to Today’s Valuation Methods.
2. Nike, Inc: Cost of Capital, Darden Business Publishing University of Virginia.
3. Methods of Valuation for Mergers and Acquisitions, Darden Business Publishing University of Virginia): UN0112 Feb 2009.
4. Warren E. Buffett, 2005.
5. Valuation of Stocks: Netscape’s Initial Public Offering, Harvard Business School: 9-296-088.
6. Understanding Economic Value Added: HBS 9-206-016.
7. Managing for Corporate Value Creation: The EVA Model.
8. Coke versus Pepsi 2001 (Harvard Case UV0008).