Resources

• Aswath Damodaran’s PPT

• Start of the class

• Syllabus

• Post Class Test & Solution

Company A?

What you don’t know is not an averaging aspect. What you don’t know, more often than not, is the fact that is more detrimental than it is beneficial about the company. Therefore, if you don’t know something, it’s a dangerous scenario.

You should subtract out market value of debt.

Market value can be lower than face value for multiple reasons:

• They have to repay the hundred million, that’s for sure, but their market value reduces because the interest rates moved. Your interest payments would have a lower present value, for example, if the interest rates are high.
• If you are a distressed company, your market value of debt would be low.

<aside> 💡 You have to ask the question why the market value is different from the book value.

</aside>

Does issuing those options change value per share?

Yes, it does. It lowers the value because it has a premium attached to it. We will see why this is a big issue.

No need to look at Good Will, doesn’t matter. This was random but useful.