Self-Study

Methods of Business Valuations

  • Tuesday, May 1, 2018 – Tuesday, April 30, 2019

  • 1.5
    CREDITS
    Finance

This CPE course examines the process of business valuation and factors that influence the value of a business. It explores the three basic methods of valuing business. Asset based valuation is calculated by book value, replacement value, and break-up/net realisable value. Earnings based valuations rely primarily on the P/E valuation method. Cash flow valuation uses the dividend valuation model (DVM) theory and the discounted cash flow (DCF) method. The course also explores the risk adjusted cost of capital equation, the capital asset pricing model (CAPM), and the efficient market hypothesis (EMH).

Objectives

  • Calculate the value of a whole entity (quoted or unquoted), a subsidiary entity or division using a range of methods including taxation
  • Compare the valuation methods used in the context of a given scenario

Highlights

  • Asset valuation
  • Forms of intangible assets and methods of valuation
  • Share prices
  • Earnings valuation
  • Dividend valuation (e.g. dividend growth model, including estimating growth from past or forecast figures and including non-constant growth assumptions)
  • Discounted free cash flow valuation (including taxation, risk-adjusted discount rate, foreign currency cash flows and sensitivity analysis)
  • Ideas of diversifiable risk (unsystematic risk) and systematic risk
  • Capital asset pricing model (CAPM), including the meaning and derivation of the component and, the ability to gear and un-gear betas
  • Calculation of an appropriate cost of capital for use in discounted cash flow analysis by reference to the nature of the transaction, including use of CAPM, dividend valuation model and MM WACC formula
  • Efficient market hypothesis and its relevance for the valuation of quoted entities
  • Impact of government incentives on entity value
  • Strengths and weaknesses of each valuation method
  • Validity of the results for use in decision making according to the nature of the target entity

Additional Information

Designed For

CGMA exam candidates
Management accountants wanting to develop skills in corporate financial strategy

Vendor

American Institute of CPAs

Field of Study

Finance

Course Number

18AIS0179

Level of Knowledge

Intermediate

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