Module Structure

For how many years should we forecast cash flows to obtain a meaningful firm valuation? And what happens with the firm afterwards? The module "Continuing Value" deals with these questions. It turns out that the market assumes a very long-term perspective when valuing assets. We therefore have to be able to understand the sources of long-term value and how to incorporate them in our analysis.

The module "Continuing Value" proceeds in 6 steps:

1. This introductory chapter motivates the topic and shows how important it is to look beyond the, say, 5 to 7 years of explicit forecasts.
     
2. We introduce a simple model to estimate continuing value and discuss the key value driver. 
    
3. We discuss the relation between growth, investment, and value creation in the long run and how these considerations affect the analysis.
    
4. We show how to estimate "normalized" free cash flows and how to estimate continuing value in a consistent way, given the cosiderations from the previous sections.
    
5. We show an alternative way to estimating continuing value using multiples.
    
6. We discuss a simplified procedure to value mature companies with only 5 assumptions.

For each topic, there is a short reading assignment, followed by some review questions and practice examples.