Business Valuations - How To Value a Company

Andrew Mower, Tutor at Kaplan, explores different approaches to business valuations. Andrew looks at 4 main business valuation methods: Asset based valuations, Dividend Valuation Model, P/E Ratios and Discounted Cash Flows
Relevant to ACCA students studying FM and AFM, ACA students studying FM and SBM, and CIMA F3 students.
ACCA REVISION:
ruclips.net/p/PLC...
CIMA REVISION:
ruclips.net/p/PLF...
00:00 - 00:46 Intro
00:46 - 04:32 Asset-Based Valuations
04:32 - 08:14 Dividend Valuation Method
08:14 - 13:22 P/E Ratios
13:22 - 18:55 Discounted Cash Flow Technique
18:55 - 19:22 Outro

[@shaista9938]

Love the visuals , concise, quick clear speech and neatness

[@pka4177]

very good, useful and informative lecture, thanks a lot

[@prequeltothesequel4073]

this video also changed my life

[@BeccaandSoph]

Really helpful, thanks Andrew!

[@ihalagen]

It is simple but touched comprehensive areas impressive manner.

[@TheTheboss0114333]

that was a very good value added video

[@tutornick]

Very useful, thanks for posting

[@playerzero2236]

This is excellent information sir

[@magdalenawidlak6568]

very good lecture

[@Livaren]

this video changed my life

[@SrikrishnanPrasanna-mb8nb]

Hello Andrew. Referring to time stamp 5:50, pl. help me with the logic/ rationale of why 'Ke less G' is the denominator.

[@AndrewMowerTuition]

Hi - this is due to it being a growing perpetuity. The mathematical formula for a growing perpetuity is CF * 1/(r-g) as you have seen - so this is using Ke as r, and growth is still g.

[@brundavenkatesh1534]

Hello Andrew, Time-stamp 4:5 to 8:05 = could u pl. shed light on logic as to why the denominator is Ke less G

[@AndrewMowerTuition]

Hi - this is due to it being a growing perpetuity. The mathematical formula for a growing perpetuity is CF * 1/(r-g) as you have seen - so this is using Ke as r, and growth is still g.

[@pigslefats]

So the value of a company is the PV of future cash flows using a discount rate. What exactly does that discount rate mean?
If the answer you get is say £1 million using a discount rate of 10% what does that mean?

[@AndrewMowerTuition]

Hi - the discount rate is the company's cost of capital (WACC). There is a separate Masterclass video on the WACC if you want to see what it's made up of!

[@pigslefats]

@@AndrewMowerTuition I know how WACC is derived. I know the calculations. I know CAPM etc, but again some clarification on the CONCEPT of arriving at a company valuation based on using a discount rate. In other words say I need an investor and I say the company is worth £1million at 10% WACC. How does the investor interpret that? An investor who is unfamiliar with WACC and discount rates

[@AndrewMowerTuition]

This is because future earnings need to at least meet the company's cost of capital to generate value for investors. If the investor is unfamiliar with WACC and discount rates, it would be wise not to explain the value using WACC. They could also watch the RUclips video on WACC to understand it 😀

[@SioneahiMoimoi-zu2in]

How about if the dividend is zero??

[@KaplanUK-EN]

The DVM would say the value is 0 if the dividend is 0 - that is one of its many flaws as a method!