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Suggest who benefitsSession 4 (Val MBA): DCF Structure and Risk free Rates!
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Suggest questionWe started this class with a discussion of structuring a DCF and the different groupings of risk, and why some types of risk matter more than others, before moving on torisk free rates, exploring why risk free rates vary across currencies and what to do about really low or negative risk free rates. The blog post below captures my thoughts on negative risk free rates: If you want to see my updated perspective on risk free rates, try my blog post from this year, built around the inflation question is here: I know that the notion that the Fed sets interest rates runs deep, and that you will be able find ways of explaining away contrary evidence, if you feel strongly enough, but I would encourage you to keep an open mind on this question,. Way too much money and resources have been wasted because of the Fed obsession over the last decade to not fight back. Start of the class test: Slides: Post class test: Post class test solution:
About Aswath Damodaran
In this session, we started by looking at the challenges of valuing private-to-private transactions, where the buyer of a private business is undiversified and cares deeply about illiquidity, and how the values are depressed as a consequence. We then drew a contrast to the same company being valued by a public company, and argued that this should lead to private businesses increasingly become parts of public companies or going public themselves. In the final section of the class, we looked at valuing/pricing IPOs, and how to deal with offer proceeds from the IPO and the IPO process itself. Start of the class test: https://pages.stern.nyu.edu/~adamodar/pdfiles/eqnotes/pvtcotest.pdf Slides: https://pages.stern.nyu.edu/~adamodar/podcasts/valUGspr23/session23slides.pdf Post class test: https://pages.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session23Ftest.pdf Post class test: https://pages.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session23Fsoln.pdf