1. Market Efficiency
A market is informationally efficient if prices reflect all available, price-relevant information
2. Market Efficiency
Weak-form, semi weak form and strong form efficiency:
Weak-form efficiency: all historical price information is entirely incorporated in the current price of the asset. Semi strong-form efficiency: all publicly available information is entirely incorporated in the current price. Strong-form efficiency: all publicly and privately available information is entirely incorporated in the current price.
3. Markets aggregate information:
Different traders hold different information. No single trader has all information. Prices aggregate the information: they (may) contain more information than any individual trader has (“wisdom of crowds”).
4. Net Debt
Includes all short-term and long-term interest bearing debt finance net (-) of cash and marketable securities. Includes bank loans, bonds, capitalized leases, accruals for pensions…
5. NWC Interpretation
NWC is the amount of current assets to be financed by equity and debt holders of the firm.
6. Can a firm‘s cost of equity ever be below its cost of debt?
No. As equity is subordinated to debt, all of the firm‘s cash flows are first used to repay debt holders, i.e. equity is the residual claim on the firm‘s CFs. When the firm borrows, it promises the creditors to repay debt and interest. If not, debt holders can force the firm into bankruptcy. Shareholders do not have these rights.
8. Which multiple
Stock price
Enterprise value
Stock price --> P/E Ratio Multiple Enterprise value --> EBITDA Multiple
9. CCA and CTA
was heißt was und welches ist höher?
CCA: Comparable Company Analyses (traiding multiple) CTA: Comparable Transaction Analyses (transaction multiple) --> höher wegen Synergien und Price Premiums
10. Explain why relative valuation is a necessary complement to the DCF approach?
transaction multiples yields the market’s “unbiased” evaluation multiples are easy to communicate. Combination of fundamental analysis with the market’s perception multiple approach is a good check for the DCF method and may identify value drivers within an industry.
11. Adverse selection problem with stocks
Bidder has an incentive to offer his shares when they are overvalued
12. Motives for the acquisition of a competitor
Synergien Undervaluation Managers' interests
13. Special forms of LBOs:
Management Buyout Management Buyin Owner Buyout Employee Buyout
14. Motives for LBOs:
enhance the value of target firm and sell it again Undervaluation Value enhancement through: change in strategy restructuring and refocusing enhanced monitoring of management implementation of better governance structures debt as a disciplinary device
15. Examples of explicit options:
Listed options Warrants Contingent Value Rights LEAPs
16. Examples of implicit options:
Equity in a deeply troubled firm The reserves owned by natural resource firms The patent owned by a firm
