Georgetown University

Corporate Valuation and Modeling

This course covers advanced valuation topics such as the free cash flow approach to equity valuation, the use of accounting and market data to measure and manage the value of the firm, and parameter estimation errors in valuation.

Learning Outcomes of Corporate Valuation and Modeling

  • Describe and explain two fundamental drivers of corporate value: Return on Invested Capital (ROIC) and Organic Revenue Growth.
  • Describe and discuss operating performance of the entire firm and of individual business units.
  • Rearrange the balance sheet to find invested capital.
  • Rearrange the income statement to find net operating profit after tax (NOPAT).
  • Analyze a firm’s historical performance through traditional ratio analysis and through ROIC decomposition.
  • Build an integrated valuation model using discounted cash flow analysis in order to value a publicly traded company and its equity:
    • Forecast key variables.
    • Develop pro forma financial statements.
    • Determine the appropriate forecast period.
    • Estimate continuing value.
    • Derive a firm’s weighted average cost of capital.
    • Derive and discount estimated cash flows.
  • Discuss and describe nuances of continuing value estimation.
  • Conduct multiples (or relative) valuation to triangulate valuation estimate.
  • Discuss and describe the nuances of multiples valuation (imbedded assumptions, leverage effects, etc).
  • Perform sensitivity analysis to pinpoint key value drivers for the firm.
  • Examine the robustness.

Click Here for Video Transcript

SPEAKER 1: American International Group has replaced Apple.

SPEAKER 2: The rise of Napster--

SPEAKER 3: Facebook remains strong.

SPEAKER 4: The most powerful--

SPEAKER 5: It's recalled--

SPEAKER 6: The technology landscape--

SPEAKER 7: The Seattle-based--

SPEAKER 8: They have better have better profit margins than Apple has.


SPEAKER 9: Are they bringing the markets to--

MICHAEL CICHELLO: We're constantly bombarded with information. Some say we live in a soundbite society, but a lot of that is really just noise. In advanced corporate valuation and modeling, I want to take you through a process of cutting through the noise to what really matters and what drives firm value. So let's look at a firm, its CEO, and their performance over about a decade long period. During this period, the CEO received hundreds of millions of dollars in compensation. At the same time, he argued that he grew the company's revenues and earnings per share substantially, outperforming his peers. But what also happened over that time period is that the stock price dropped by 1/3.

So in this course, we want to focus on what really drives firm value, return on capital, cost of capital, long-term organic revenue growth. So it's not just earnings that drive value. I'm looking forward to taking you through this journey in advanced corporate valuation and modeling, where we can really focus on what matters and cut through the noise.