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Chapter 20

Business valuations and market

efficiency

Outcome

By the end of this session you should be able to:

 identify and discuss reasons for valuing businesses and financial assets

 identify information requirements for the purposes of carrying out a valuation in
a scenario

 discuss the limitations of the different typed of information available for valuing
companies

 value a share using the dividend valuation model (DVM), including the dividend
growth model

 define market capitalisation

 calculate the market capitalisation of a company using the DVM, including the
dividend growth model

 explain the difference between asset- and income-based valuation models

 value a company using the statement of financial position, net realisable value
(NRV), and replacement cost asset-based valuation models

 discuss the advantages and disadvantages of the different asset-based
valuation models

 value a company using the price/earnings (PE) ratio income-based valuation
model

 value a company using the earnings yield income-based valuation model

 value a company using the discounted cash flow (DCF) income-based valuation
model

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