Session 18 (Val Undergrad): Valuing Declining, Financial Service and Emerging Market firms

In this session, we wrapped up our discussion of intrinsic valuation. First, we talked about valuing declining and emerging market companies, and the challenges we face with each, before turning our attention to financial service firms For decades, we have valued banks using the dividend discount model, simply because getting cash flows is so difficult, but that approach is built on trusting management at banks to behave sensibly (paying out what they can afford to in dividends) and regulators to do the same. For me, that trust was breached in 2008, and I present a way of estimating FCFE for a bank, using investment in regulatory capital as my stand in for reinvestment. Next session, we will wrap up the valuation section and start on pricing. If you are interested in reading more about valuing financial service companies, try this link:
https://papers.ssrn.com/sol3/papers.c....

Start of the class test: https://pages.stern.nyu.edu/~adamodar...
Slides: https://pages.stern.nyu.edu/~adamodar...
Post-class test: https://www.stern.nyu.edu/~adamodar/p...
Post-class test solution: https://www.stern.nyu.edu/~adamodar/p...