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.
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 Other
Sign Normalcy Growth Source of g vs. FCFE Leverage Factors
+'ve Normal Stable NA =FCFE Stable NA
+'ve Normal Stable NA FCFE Stable NA
+'ve Normal Stable NA NA Unstable NA
+'ve Normal Moderate General =FCFE Stable NA
+'ve Normal Moderate Specific =FCFE Stable NA
+'ve Normal Moderate Specific FCFE Stable NA
+'ve Normal Moderate Either NA Unstable NA
+'ve Normal High Either =FCFE Stable NA
+'ve Normal High Either FCFE Stable NA
+'ve Normal High Either NA Unstable NA
+'ve Abnormal NA NA NA Stable NA
+'ve Abnomal NA NA NA Unstable NA
-'ve Cyclical NA NA NA Stable NA
-'ve Cyclical NA NA NA Unstable NA
-'ve Troubled NA NA NA Either Turn around
-'ve Troubled NA NA NA Either Bankruptcy
-'ve Start-up NA NA NA Either Many lines
-ve Start-up NA NA NA Either Single line
NA: Not Applicable
If you have further questions on the models, review the appropriate chapter in the book.
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
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.
2 stage DDM
2 stage FCFE
2 stage FCFF
3 stage DDM
3 stage FCFE
3 stage FCFF