Valuation Assignment Help- Master the art of Valuation!

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Welcome to the world of Equity research! Every now and then whenever I come across any equity research  or valuation report, I feel puzzled that how on earth a human being did such complex analysis? What are their assumptions? These reports haunted me a lot until I came across the blog of Prof. Damodaran . I followed his lecture slides religiously and tried to explore the world of valuation from Indian perspective. In the beginning I faced lot of difficulties but as I proceeded I saw the things are not as difficult as they seem to be. So, I got an idea to share my experience with you and help you to understand this weird world of analysis and valuations.

Before getting into any technical details, let’s first understand what valuation is and how can we do it from layman’s perspectives? Let’s assume that Ram is a shopkeeper and he wants to sell his business to third party. His shop is having a good reputation in nearby locality and is known for quality products and services. But since his family is planning to move to some other place, so he doesn’t have any other option then to sell his business. Now, the question is how can he value his shop? Should he sell it with the price equivalent to the costt of inventory he is having? (He does all his transactions in cash so no account receivables and payables)

Many of you who are reading this blog simply tell that he should sell his business equivalent to the cost of inventory he is having in his stores. This sounds rational too as there is nothing wrong in selling the business equivalent to the amount of inventory he possesses. But you are wrong and it is here where the role of valuation comes in to the picture. How? Simple, what is the cost of the name and fame that he gains for his shop from his sheer hardworking? What is the cost of the guaranteed income that you will earn by buying his shop? So, he shouldn’t sell his shop in just the amount equivalent to the inventory rather he must calculate the cash flow that he will generate from his shop and then discount it with the return that he is getting from its shop to get the actual value. He can easily get the return percentage from its past profit to calculate the true value of the firm.

Now, replace Ram’s shop with some big firm and repeat the same thing, you will get the valuation of the firm. But here you will have to subtract all the expenses and add depreciation, amortization etc. to get free cash flow which you will discount with the company’s cost of capital to get the actual value of the firm. Kindly remember that there lies lot of difference in the valuation of the firm and the Ram’s shop as the former involves lot of assumption and complex calculation which I will explain in my next post.

Be ready to explore the world of valuations with me from my next post  where I am going to explain the concept of discounted cash flow in Global Context.

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Valuation Assignment Help- Fundamentals of Valuations

Hi Friends! We at WWW.assignmentconsulatncy strives to help student in all aspects of finance assignments & online homework help. Now, my question is why we do the valuations? Because in my last post I did the valuations for a shop to make you people understand its concepts, but in reality Investors do it to find the true or intrinsic value of a firm. This help them in deciding to go for buying or selling decision of the firm’s stock based on its current market price.

One thing that puzzled me was that if there was something like true or intrinsic value of a firm, then why don’t investors simply do the valuations before investing in a firm’s stock and earn lot of money because true value always give the right value .And if they are doing so then why people are losing money in the stock market. So, is there something like true or intrinsic value for a company or it is just a myth? Now, my answer to this question is that valuation is based on future earnings, discount rate etc. and all these things depend on lot of assumptions and historical data. So, the value that comes out from the valuation is not actually the true value but a biased value based on many assumptions. That’s why if one read the equity resarch report from different agencies; one can find different value for the stock of the same company because every agency takes assumptions as per their own understanding about the company and its fundamentals. Hence, there is nothing like true or intrinsic value, but a biased value which gives us a rough idea about the company true value.

Now, one might ask that when the market price is available why should we do the valuation? Why don’t we directly refer the market price and make our decisions of buying and selling? There is no clear cut answer to these questions and therefore we make the most important assumptions of Valuations i.e. the markets are inefficient and make mistakes in accessing value because in an efficient market, the market price is the best estimate of value. That’s why we do the valuations to find out the rough estimates about the true value of the company stocks and then on the basis of our assumption of inefficient market, we make the decision of buying or selling.

There are many methods available for doing valuations but the most famous and commonly used method is discounted cash flow models (DCF). As the name suggests, this methods discount the future cash flow of a company to find out its present value (As explained by me for Ram’s shop in my last post). The basic of this model is the philosophy that “Every asset has an intrinsic value that can be estimated, based upon its characteristics, fundamentals growth and risks”. Hence, for investors who think to buy businesses rather than stocks while making investment, DCF is the best way to predict its value. Secondly, it is based on company fundamentals and intrinsic characteristics, so it is less exposed to market moods and perceptions.

Hope this post helps you to understand the basis of valuations and DCF. Be ready to explore the mysterious world of assumptions and complex calculation while doing valuations using DCF in my next post.

If you want to get customized help regarding valuation assignment help from our experts, Please contact us @ www.assignmentconsultancy.com or mail us to support@assignmentconsultancy.com

We also provide helps related to

Business Finance Assignment Help, Personal Finance Assignment Help, International Finance Assignment Help, Corporate Finance Assignment Help

All you need to do is to visit our website and log in your account, convey your assignment requirements to our finance assignment help customer executives. Your job is done. It is as easy as this. So hurry now and order your finance assignment help or any other assignments help at www.assignmentconsultancy.com or mail us at support@assignmentconsultancy.com.