BUSINESS SCHOOL

Unit of Study Outline

Unit Code FINC6021
Unit Title Corporate Valuation
Semester 2, 2018
Pre-requisite Units: FINC5001
Co-requisite Units:
Prohibited Units:
Assumed Knowledge and/or Skills:
Unit Coordinator: Associate Professor Dr Shumi Akhtar
Address: Room 423, The Business School Building(H69), Darlington NSW 2008
Email: shumi.akhtar@sydney.edu.au Phone: 90369309
Consultation Hours: Consultation Hours will be detailed on Canvas during Week 1 of Semester
Class Day(s): Please go to Canvas for class times and locations
Required Text / Resources:
Valuation: The Art and Science of Corporate Investment Decisions, International Edition, Second Edition,
Titman, S. and Martin, J.D., Pearson 2014. ISBN-13: 978-0-13-231147-2.

This text book prescribed will complement the subject. It is not a substitute for the subject. Other
resources will be provided and used throughout the subject. Unfortunately, at this stage no E-Book is
available for this text.

This unit of study outline MUST be read in conjunction with

The Business School Unit of Study Common Policy and implementation information that applies to every unit of study offered by the
Business School (http://sydney.edu.au/business/currentstudents/policy). All assessment rules, such as standards used, penalties etc, are
covered.

The Business School Student Administration Manual - for information about all processes such as illness, appeals etc (
http://sydney.edu.au/business/currentstudents/student_information/student_administration_manual) When deciding applications and
appeals relating to these matters it will be assumed that every student has taken the time to familiarise themselves with these key policies
and procedures.

The Business School seeks feedback from students and staff in order to continually improve all units offered. For information on previously
collected feedback and innovations made in response to this feedback, please see
http://sydney.edu.au/business/learning/planning_and_quality/feedback/student

1. Unit of Study Information

This unit applies all aspects of finance theory to the general problem of valuing companies and other financial
assets. This requires a synthesis of the fundamental concepts of present value, cost of capital, security valuation,
asset pricing models, optimal capital structures, derivative pricing and some related accounting concepts. The unit
aims to reach a level of practical application that allows students to understand both the theoretical frameworks
and institutional conventions of real world corporate valuations. Basic valuation concepts from accounting are
reconciled with the finance theory on which firm value ultimately stands. Students are asked to make extensive
use of Excel or similar software in valuation exercises.

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2. Program Learning Outcomes and Unit Learning Outcomes

The Program Learning Outcomes for this Program are located at
http://sydney.edu.au/business/about/accreditations/AoL

Unit Learning Outcomes

Unit Learning Outcomes Program Learning Outcomes
On the successful completion of the Unit you should be able to:
- Demonstrate an understanding of the various approaches to valuation 1. Business Knowledge
analysis. 2. Critical Thinking
- Solve practical financial problems using a range of valuation techniques. 4. Communication
- Understand and create pro-forma financial statements for a variety of
business structures.
- Estimate a firm's cost of capital.
- Generate an estimate of firm value and an appropriate recommendation
based on an assessment of relevant quantitative and qualitative
information.
- Critically analyse the models covered in the course and be able to 2. Critical Thinking
discuss 3. Business Analysis and
their appropriateness under various scenarios. Problem-Solving
- Interpret the financial implications of quantitative based results. 4. Communication
- Ascertain the relevance of information sources for different valuation
models.
- Test the reasonableness of financial valuation results.
- Solve for value estimates using a range of developed methods. 1. Business Knowledge
- Use the functionality of Microsoft excel to create pro-formas financial 2. Critical Thinking
statements, undertake cost of capital calculations, and perform scenario 3. Business Analysis and
based analyses. Problem-Solving
- Identify firm structural issues and be able to assess the value of changes
in investment and operational policies.
- Effectively communicate valuation results through a range of quantitative 2. Critical Thinking
and qualitative outputs. 3. Business Analysis and
- Use Microsoft Excel (or other data analytical packages) to demonstrate Problem-Solving
forecast construction. 4. Communication
- Express key assumptions and forecasts for which valuation hinges on.
- Cooperate with other team members to ensure cohesion between 4. Communication
quantitative and qualitative elements of a valuation result. 5. Team Working
- Effectively participate in discussions about subjective valuation criteria.
- Provide evidence that you have contributed to the team assessment.

3. Assessment

Program
Assessment Assessment Individual/ Assessment Learning Due Closing
Length Weight Due Date
Title Type Group Conditions Outcomes Time Date
Assessed
Mid Mid
One hour
Mid-Semester In-semester Semester Semester
Individual Compulsory 1, 2, 3 and 30 25%
Test exam (mid) Exam Exam
mins
Period Period
Will be
advised in
Assignment Assignment Group Compulsory 1, 2, 3, 4, 5 25% 5:00pm 22-Oct-2018 28-Oct-2018
assignment
brief
Three Final Exam Final Exam
Final Exam Final exam Individual Mandatory 1, 2, 3 50%
hours Period Period
Academic
Week 4
Honesty

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Assessment details

Mid-Semester Test

● Task Description
The mid-semester exam will be in multiple-choice format and will cover all material relating to weeks one to
five inclusive. This assessment will provide students with an opportunity to review initial principles and,
therefore, should serve as a gage on how they are placed for the final exam. Specimen test questions may be
posted onCanvas.
The exam will be of one hour and 30 minutes duration and will be held in-class during Mid Semester Exam
Period (Week 8, 20 Sep, 2018). The exact location and time of the exam will be posted on Canvas and
discussed class.

Replace ment tests may be oral or written tests.

A note on pre-requisite knowledge: You are assumed to know the material covered in the pre-requisite
subject, FINC5001. This knowledge is likely to be required in all assessment tasks. In particular, you
are expected to be competent in discounted cash flow an alysis and to understand basic capital
budgeting and capital structure theory.

● Assessment Criteria
1. Successful solution of problems involving theoretical and quantitative analysis.
2. Knowledge of the factual content of the subject up unto week 5 inclusive.

● Feedback - What, when and how feedback will be provided for this assessment
Marks will be made available as soon as possible and, hopefully, no later than two weeks after the date of the
test. However, if there is any unforeseen circumstance then it may take longer and students will be informed
accordingly via Canvas.

The exam will assess your ability to apply the theories and methods learnt in the unit. You will be required to
analyse valuations using techniques introduced in the unit. Feedback will be provided in a number of ways.
After students have received their marks an in-class discussion will take place regarding questions that
students appeared to struggle with.Individua lreviews will be available by request with the lecturer teaching
your stream.

Assignment

● Task Description
The group assignment is to be completed in groups of more than one but no more than five students. It will
involve the analysis of a company and the valuation of a company that is Exchange-listed Company from
within the chosen industry. It is anticipated that the analysis will involve the use of company financial reports
and other publicly available data. There will be a group research presentation component that will be
assessed in Week 12 of the semester.

You will need to find relevant material and critically analyse it to add weight to your arguments. Your report will
be assessed based on your application of the tools and methods learnt in the subject. We will evaluate how
you analysed the data provided, how you are able to compare and evaluate different methods/approaches
and the identification of anyl imitations to the approach you have taken. Students are also required to submit
(individually) a diary/log of how the problem was solved within the group. This should detail collaborative
approaches to problem solving, division of tasks among members and how the report spreadsheet was
completed. Anyi ssues regarding the contribution of group members should also be included. Without
exception, issues will develop within some groups. There will be no assistance granted to group members
who appeal after thes ubmission of their group reports. If there are issues, then these need to be brought to

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the attention of the lecturer of your stream at least two weeks prior to submission. Students will be asked to
provide an evaluation of the efforts of their team members. If the evaluation of the effort of a group member is
perceived to be below an acceptable level of contributiont hen, if it is found after further investigation by the
UOS coordinator that the person involved had not contributed equally, penalties in the form of lost marks will
result.

Students will be required to present their assignment work in groups (all members must attend and present)
due in week 12. More details on this will be provided in-class.
An announcement about the format of the assignment and submission requirements will be posted on Canvas.
In order to avoid losing marks you should make sure you read this announcement and follow the instructions
within it.

● Assessment Criteria

1. Conforming with instructions (e.g.word length, font, other instructions)

2. Presentation, communication & style (written)
3. Clarity of expression (incl. accuracy, spelling, grammar, punctuation)
4. Attention to purpose
5. Referencing
6. Analysis
7. Problem solving
8. Critical reasoning/critical thinking
9. Synthesis

● Feedback - What, when and how feedback will be provided for this assessment
For those groups who submit their assignment by the due date, marks with comments will be provided either
on Canvas or on hardcopy as soon as practical. The target date for release of marks will be two weeks after
submission. If the release of marks is delayed, a revised release date will be provided on Canvas.

Final Exam

● Task Description
The final exam will assess the material discussed between Weeks 1-13. It is a 3-hour closed book test that is
a combination of theoretical and practical exercises. It will assess a student's theoretical understanding of the
models covered in class and the ability to think critically about the models and solve problems related to
financial valuation. Specimen exam questions may be posted on Canvas.

Replacemen texams may be written or oral.

This assessment is listed as MANDATORY which means you must undertake the assessment and achieve at
least 45% of the available marks in that assessment. Students who fail to achieve this minimum standard in
this assessment, even when their aggregate mark for the entire unit of study is above5 0%, will be given a Fail
grade for this unit. As a result a student's academic transcript will show a Fail grade and the actual mark
achieved if the final mark of the unit is between 0-49 and a Fail grade and a capped moderated mark of 49 for
all other final marks

This assessment is listed as MANDATORY which means you must undertake the assessment and achieve at
least 45% of the available marks in that assessment. Students who fail to achieve this minimum standard in
this assessment, even when their aggregate mark for the entire unit of study is above 50%, will be given a Fail
grade for this unit. As a result a student's academic transcript will show a Fail grade and the actual mark
achieved if the final mark of the unit is between 0-49 and a Fail grade and a capped moderated mark of 49 for
all other final marks.

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● Assessment Criteria

1. Conforming with instructions (e.g.word length, font, other instructions)

2. Clarity of expression (incl.accuracy, spelling, grammar, punctuation)
3. Use of literature/Knowledge of theory
4. Analysis
5. Problem solving
6. Rationale
7. Conceptualisation
8. Critical reasoning / critical thinking

● Feedback - What, when and how feedback will be provided for this assessment
Final results will be released through the results system. A final exam review will be held in accordance with
the practice of the Finance Discipline

4. Other Resources for Students

All lectures and seminars are recorded and will be available within the LMS for student use. Please note the
Business School does not own the system and cannot guarantee that the system will operate or that every
class will be recorded. Students should ensure they attend and participate in all classes.

There are a number of very good reference texts available on the subject of corporate valuation. They include:

1) Koller, T., Goedhart, M., Wessels, D., (2010). Valuation: Measuring and Managing the Value of Companies.
5th ed. New Jersey: John Wiley & Sons.

2) Damodaran, A (2006). Damodaran on Valuation: Security Analysis for Investment and Corporate Finance.
New Jersey: John Wiley & Sons.

3)Daves, P.R., Ehrhardt. M.C., Shrieves, R.E., (2004). Corporate Valuation: A Guide for Managers and
Investors. Ohio: South-Western Cengage Learning.

4) Brealey, R.A, Myers, S., Allen F., (2011). Principles of Corporate Finance. 10th ed. London: Mcgraw-Hill.

5) Graham, B., Dodd, D., (1940). Security Analysis: Principles and Techniques. 2nd ed. New York:Mcgraw-Hill.

6) Klarman, S., (1991). Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor.
New York: HarperCollins.

7) Benninga, S., Sarig, O. H., (1997). Financial Statement Analysis and Security Valuation . 5th ed. New
York:McGraw-Hill Education. 740.

8) Pinto, J. E., Henry, E., Robinson, T.R., Stowe, J.D. (2015). Equity Asset Valuation. 3rd ed. Wiley

PASS
Peer-Assisted Study Sessions (PASS) is a peer-facilitated, cooperative student support scheme aiming to
improve students' academic performance by providing extra, free learning opportunities with trained student
facilitators. Each session includes problem solving practice in areas directly related to understanding the unit
concepts more thoroughly. PASS features small class sizes and a friendly personal approach to help you
reinforce key course requirements in a collaborative, active and social learning environment. Registrations open

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in the first week of semester.

For more information or to register, please visit:
https://sydney.edu.au/students/peer-assisted-study-sessions.html
Email all enquiries about the PASS program to: business.pass@sydney.edu.au

Maths in Business
The Business School provides a free series of workshops with student facilitators open to all students interested
in mastering both basic and upper intermediate level mathematics. The program includes workshops from basic
to intermediate level maths and Excel, both of which are fundamental skills for any aspiring business
student.The Maths in Business program helps ensure high achievement throughout your business degree. Most
foundational units of study require a firm understanding of maths, and this is essential to senior units in
accounting, business analytics and finance. Registrations open in the first week of semester.
For more information or to register, please visit: https://sydney.edu.au/students/maths-in-business.html
Email all enquiries about the Maths in Business program to: business.maths@sydney.edu.au

Readings
Unit readings are available on the LMS

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5. Unit Schedule

Week List of Topics Assessments Due

Introduction
1 - Simple Concepts in Valuation
30 Jul 2018 - Mainstream Valuation Techniques
Titman/Martin (Ch.1)
Financial Statements (Part 1)
2
- Using Financial Statements
6 Aug 2018
Titman/Martin (Ch.2 and Ch.6)
Financial Statements (Part 11)
3
- Modelling Financial Statements
13 Aug 2018
Titman/Martin (Ch.6)
4 Firm Operations and Environment
20 Aug 2018 Lecture material
Risk Analysis
- Uncertainty and Investment Analysis
5
- Sensitivity, Scenario and Simulation Analysis
27 Aug 2018
- Decision Tree Analysis
Titman/Martin (Ch.3)
Firm Free Cash Flows
- Determining Cash flows
6
- Cost of Capital
3 Sep 2018
- Terminal Value.
Titman/Martin (Ch.2 and Ch.5)
Cost of Capital
7 - Estimating a firm’s cost of capital
10 Sep 2018 - Estimating Required Rates of Return for Projects
Titman/Martin (Ch.4 and Ch.5)
8
Mid-Semester Examination (held in class) Mid-Semester Exam period
17 Sep 2018

Common week 24 Sep to 30 Sep

9 Relative Valuation Using Market Comparables

1 Oct 2018 Titman/Martin (Ch.8)
Enterprise Valuation
10 - Earnings Dilution, Incentive Compensation
8 Oct 2018 - Alternative Enterprise Valuation Models
Titman/Martin (Ch.7 and Ch.9)
11 Valuation in a Private Equity Setting
15 Oct 2018 Titman/Martin (Ch.10)
Group Assignment Due (22
12 Oct, 2018) + In-Class
In-Class Presentations (Refer to Group Assignment Task)
22 Oct 2018 Presentations Due (25 OCt,
2018)
13
Outstanding Material + Review
29 Oct 2018

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