8616344.

xls

Using the models in this diskette

The spreadsheet programs on this diskette are designed to supplement the

book on valuation. While short descriptions of the models are provided,
detailed questions can be best answered by referencing the appropriate
section in the book.

What do you need to run these programs?

1. Either Lotus 3.* or Excel 4.* (IBM) or Excel 4 (Mac).
2. The data for the firm that you want to value.

A short description
There are three groups of programs on this diskette --
I. Discounted Cashflow Valuation:
(1) Dividend Discount Models (Steady State, 2 stage, 3 stage, H model)
(2) Free Cashflow to Equity Models (Steady State, 2 stage, 3 stage)
(3) Free Cashflow to Firm Models (2 stage, General)
II. Relative Valuation:
(1) PE Multiples
(2) PBV Multiples
(3) PS Multiples
III. Option Pricing Models
(1) Valuing Equity
(2) Valuing Product Patents/ Start-up firms
(3) Valuing Natural Resource firms

A suggested sequence for the first-time user

If you know the model you need, go directly to the program you need.

Page 1
 8616344.xls

If you do not know the model you need for your valuation, do the following:
1. Run the program titled 'Model.wks (Model.xls), or see chart below.
2. Enter the characteristics of the firm you want to value.
3. Go the model suggested by the model choice program.
4. Choose either the simpler or more complex version of the model.

Notes on using the spreadsheet models

1. Enter the inputs in the units requested.
2. Check the warning page, to see if any red flags are raised.
3. Check the output page, to see the output.

Choosing the right model

Earnings Dividends
Sign Normalcy Growth Source of g
vs. FCFE Leverage
+'ve Normal Stable NA =FCFE Stable
+'ve Normal Stable NA ­FCFE Stable
+'ve Normal Stable NA NA Unstable
+'ve Normal Moderate General =FCFE Stable
+'ve Normal Moderate Specific =FCFE Stable
+'ve Normal Moderate Specific ­ FCFE Stable
+'ve Normal Moderate Either NA Unstable
+'ve Normal High Either =FCFE Stable
+'ve Normal High Either ­FCFE Stable
+'ve Normal High Either NA Unstable
+'ve Abnormal NA NA NA Stable
+'ve Abnomal NA NA NA Unstable
-'ve Cyclical NA NA NA Stable
-'ve Cyclical NA NA NA Unstable
-'ve Troubled NA NA NA Either
-'ve Troubled NA NA NA Either
-'ve Start-up NA NA NA Either

Page 2
 8616344.xls

-ve Start-up NA NA NA Either

NA: Not Applicable

Page 3
 8616344.xls

If you have further questions on the models, review the appropriate chapter in the
Expanded Simple Chapter
MODELCHO.* Model Choice
NEWGORDO.* Gordon Growth Model (pp
NEWDDM2S.* XDDM2.* Two-Stage DDM
NEWDDMHM.* XDDMH.* The H Model
NEWDDM3S.* Three-Stage DDM
NEWFCFES.* FCFE Stable Growth Model
NEWFCFE2.* XFCFE2.* Two-Stage FCFE Model
NEWFCFE3.* Three-Stage FCFE Model
NEWFCFF2.* XFCFF2.* Two-Stage FCFF Model
DETAILVA.* General FCFF Model
NEWNORME.* Normalized EPS Model
XEQUITYM.*Multiples for Equity
XMULTCF.* " for firm
"
NEWRESTR.* Corporate Restructuring
EQUITYOP.* Equity as an Option
NEWPRODU.* Natural Resource Option
NEWNATRE.* Product Option
The simple versions of the programs require fewer inputs but allow fewer options.

Page 4
 8616344.xls

esigned to supplement the

e models are provided,
rencing the appropriate

age, 3 stage, H model)

, 2 stage, 3 stage)

he program you need.

Page 5
 8616344.xls

valuation, do the following:

, or see chart below.

rsion of the model.

s are raised.

Other Valuation
Factors Model
NA Gordon Growth
NA FCFE Stable
NA FCFF Stable
NA H Model
NA 2 stage DDM
NA 2 stage FCFE
NA 2 stage FCFF
NA 3 stage DDM
NA 3 stage FCFE
NA 3 stage FCFF
NA Normalized EPS
NA Normalized FCFF
NA Normalized EPS
NA Normalized FCFF
Turn aroundFCFF Model
Bankruptcy Option Model
Many lines FCFF Model

Page 6
 8616344.xls

Single line Option Model

Page 7
 8616344.xls

appropriate chapter in the book.

ow fewer options.

Page 8