Chapter One Basic concepts in market-based cash flow valuation
1.1.1 Finite streams of cash flows
1.1.2 Content and organization of the chapters
1.2 Market-based procedure for valuation
1.2.1 Integrated valuation framework with complete financial statements
1.3 Steps in cash flow valuation
1.3.1 Why invest?
1.3.2 The role of information and expectations
1.4 Present value (PV)
1.4.1 Perfect capital markets and arbitrage opportunities
1.4.2 Valuation in an imperfect but real world
1.4.3 Perfect capital markets
1.4.4 Replicating portfolio strategy
1.4.5 Traded firms in the U.S. stock market
1.4.6 Traded firms in an emerging market
1.5 The standard after-tax Weighted Average Cost of Capital (WACC)
1.6 Types of cash flows
1.6.1 What is FCF?
1.6.2 What is cash flow to (existing) debt?
1.6.3 What is cash flow to equity (CFE)?
1.7 The WACC in a Modigliani and Miller (M & M) world
1.7.1 WACC in an M & M world without taxes
1.7.2 An unlevered company versus a levered company
1.7.3 The no-arbitrage argument
1.7.4 Slicing the cake
1.7.5 Debt and equity financing
1.7.6 Formula for the WACC without taxes
1.7.7 Equality of the unlevered and levered returns
1.8 WACC in an M & M world with taxes
1.8.1 The expanding cake
1.8.2 Why firms do not have 100% debt?
1.9 The fundamental FCF relationship
1.10 The main valuation methods and formulas for cost of capital
1.10.1 The tax shield (TS)
1.10.2 After-tax WACC applied to the FCF
1.10.3 Alternative expression for the WACC applied