MSB 370A Cases in Valuation
This is a case course in finance. Most of the cases concerns financial valuation. Valuation can be summarized as: Setting a price on an asset. The asset can be a simple one, like a bond, or a complex one, like a corporation. The course synthesizes what has been learned in other courses, and applies it to valuation settings.
Upon completion of the course, the candidate will be able to
Upon completion of the course, the candidate will be able to
Prerequisites: MSB309 Corporate Finance.
Textbook: Titman, Martin: Valuation (TM) The textbook is supplemented with some articles, and cases. The textbook is concerned with the practicalities of valuation – how to estimate the numbers used for inputs to the discounted cash flow analysis. It will be covered quickly in the first few lectures.
The course is an in-class course, with physical presence in the classrom. For the lectures, if you are prevented from being in class, full lecture notes, and alternative streamed lectures are provided. For the case discussions: You have to be present in the classrom.
Classroom: EAL H-209
|35||29 aug||Introduction and planning|
|Cash flow estimation||TM 1, 2, 3, 6|
|36||5 sep||Uncertainty in cash flow estimates|
|Cost of Capital,||TM 4, 5|
|37||12 sep||Case: Eaton Corporation:|
|Portfolio Transformation and the Cost of Capital|
|38||19 sep||The Financial Detective|
|Relative valuation (ratios)||TM 8|
|Enterprise Valuation||TM 9|
|Valuation parameters relevant for Norway||PWC|
|39||26 sep||Case: Saito Solar (Hand in case)|
|40||3 oct||Case: Tottenham Hotspur|
|46||14 nov||Exam Prep, Problem Session (Voluntary)|
The course starts with a few lectures where we cover some basic issues, before looking at actual cases. There may be changes, with a possible guest lecture or two.
Some of the lectures are structured in a very specific way: Before the class I put up examples/problems you must look at and figure out how to attack/solve. I go through these examples in class and post updated notes (with some solutions) later. If you do not look at the material before the class you will not get much out of the class.
When we start doing cases we will form groups of up to three people. The groups will have to prepare the various cases, present and discuss them. As part of the course evaluation all will have to hand in case solutions to selected cases.
While it is not necessary for the course, there is another book that nicely complements the textbook, namely Koller, Goedhart, and Wessels (2015), which is also an industry standard, but is more directly focused on company valuations.
In Norwegian: The 2/2011 issue of the journal “Praktisk Økonomi og Finans” is a special issue on Valuation. I recommend those fluent in Norwegian to read the relevant articles. Another document in Norwegian is PWC’s annual survey on parameters relevant for Norway: Risikopremien i det norske markedet.
Purchasing cases: You will have to purchase copies of the cases from the Harvard Business School Press Homepage. A link will be provided on the course homepage.
Cases - in class
This course is primarily a case course, which is very different from what most of you are used to from before. A case course is meant to get closer to the way things actually happen in the real world. We are faced with a business problem to be analyzed/discussed in class. To get a reasonable case discussion everybody must have gone over the case before class. In these situations the instructor will not be there tell you what you should do, instead he is just there to keep the discussion flowing.
In practice, for each case: One group will be designated to present the case. Another group will be designated as opponents, examining the first group’s solution. Everybody should be prepared to criticize the proposed solution(s) and come up with better alternatives.
Cases – handins
Two of the cases are handins. Each group will hand in the case in the morning, before the case discussion. After the case is handed in, your group will be randomly assigned another groups case, and write an evaluation of the other groups.
Practicalities: You will upload your case solution to Canvas, with a deadline in the morning of the case discussion. Towards the end of the course you will upload archival copies of your case solutions to Inspera.
Working with Cases
The HBS cases are meant to be closer to the real world than your typical textbook problem. As soon as the word “real world” appears warning bells should ring. The real world is much harder to grasp than a typical textbook problem. It also needs answers/decisions “yesterday”, which is hard when neither the issue and the data is obvious from the context. Typically a case contains much more information than one need, and it is never a simple, unambiguous question to be answered. In solving a case you have to figure out the main questions facing decision makers in the case you are reading. To do so you need to place yourself in the situation described by the case, ask yourself: Where do I see a need for changes/decisions? Sometimes you will get some pointers to relevant questions for a case, but these should only be viewed as indicative of the relevant issues.
Think you are presenting to the company board
In this class you should behave as if you are presenting material to the company board. The case hand-ins should read like a report you can give to the board. Remember that boards are action-oriented, they only care about making decisions. The purpose of any presentation to the board is to give a recommendation. The same is true for case presentations. You give your recommendation about what course to take, and you use your analysis to justify your recommendation. You need to get out of “writing-exams-mode.” Welcome to the real world.
The lectures notes include advice on writing that you should review. As an appendix you will find the components of the rubric used to evaluate the handins.
Evaluation: Based on written handins to cases, critiques of cases, and a final exam. Participation in class discussion of cases is mandatory.
The case handins are handled as follows: You will upload the handin to Canvas in the morning, before the case discussion. You will also need to upload archival copies of these handins to inspera towards the end of the course.
The exams is in the regular exam period. It is a 4 hour exam.
Frequently Asked Questions
For those that want to delve into valuation at greater level than the lectures (or as al alternative to the lectures), Professor A Damodaran has posted his valuation lectuers on YouTube, which I recommend. Link: Damodaran Lectures
Grading of case-related groupwork to be based on the following rubrics