1. COURSE CONTENTS
The objective of this class is to provide you a framework for analyzing a firm’s past performance, estimating its future performance, and valuing its equity. The student should leave the course with the ability to generate reasonably accurate (or at least logically consistent) forecasts of a firm's future financial performance, including revenues, earnings, asset balances and free cash flows. The class also presents all the major valuation models in a unified framework so the student should be facile in moving between discounted cash flow models, residual income models, and models based on market multiples such as the price-earnings ratio and the market-to-book ratio. The class has a financial modeling component, eVal, so that as the class progresses, students will build the pieces of a comprehensive financial statement forecasting and valuation tool. The course illustrates contemporary forecasting and valuation techniques used by practitioners as well as evidence from academic research on the effectiveness of these techniques.
2. STUDENT LEARNING OUTCOMES
By the end of this course you should be able to:
3. ASSESSMENT and EVALUATION
- Analyze financial statements, footnotes, and other corporate disclosures (e.g. conference calls)
- Prepare business forecast from the financials and use the forecasts to determine a firm’s fundamental value using various valuation models
- Develop the skills to critique security analyst reports, write and present your own research report
Students will demonstrate their understanding of and competency in course topics through an individual exam and team assignments. The final grade will be calculated as follows:
Assessment Delivery Percentage of Grade
Group assignments Group 30% (3 assignments, 10 pts each)
Final exam Individual 70% (60 pts)
TOTAL 100% (100 pts)
See the class schedule section for the full list of assignments. There are three assignments. These assignments are to be completed as group work. Your groups will be assigned in the first class of the course. The assignments are mini-case studies where you have to apply the material we learned in class to a real world company. The assignments also build the foundation for the FSA report. The assignments are group work. Every team member should participate in doing the assignments. That is the only way you can be sure that you have mastered the material.
Each group will be required to write up the answers to the assignments in a Microsoft Word/
Excel document. You are expected to discuss your assignment as a group while you work on it. Any assignments posted after class has started will be considered late. Late assignments will not be accepted. It is your responsibility to ensure your assignments have been successfully posted/ emailed to me. We will go over the assignments at the beginning of each class.
The final exam is individual work. In other words, you may not consult any other individuals during the examination. The final exam includes multiple-choice questions, short-answer essay questions, small case analyses, and computational problems. It will cover material from the prior lectures (e.g. reading material, in-class problems, slides and assignment topics).
I do not give makeup tests because it is impossible to make an equivalent test without placing the student at either an advantage or disadvantage. After returning the test, if you believe you should receive additional credit please provide a written explanation in support of your position with your answer from your exam paper for me to review. I will need quiet time to review your submittal so that I can give it the serious thought your request deserves. You need to submit your request to me in person or by email within one week after I return your test. Thanks for understanding.
Although I do not expect cheating in my class, the penalty is an FAIL for the course. Cheating occurs when you look at one or more students' papers during an exam or obtain help from faculty or students outside your team on assigned homework sets or tests. Plagiarism occurs when you copy large sections of an author’s material without referencing it. If in doubt, please email me.
4. TEXT AND COURSE MATERIAL
Lundholm and Sloan, Equity Valuation and Analysis, McGraw-Hill Companies, 3rd edition. Note: You DO NOT NEED the eVal software that comes with the book. I will provide you with an updated version. We will use the eVal Excel spreadsheet. extensively both in class and out.
All relevant materials beyond the textbook (e.g. lectures slides, in-class solutions, and assignment solutions) will be posted online.