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.