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Essay / Research Paper Abstract
A 4 page paper defining fundamental analysis and several approaches to valuation. Valuation models discussed are book value; discounted dividend, discounted free cash flow, residual income and abnormal earnings growth models. Bibliography lists 7 sources.
Page Count:
4 pages (~225 words per page)
File: CC6_KSfinFundAnaVal.rtf
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Unformatted sample text from the term paper:
Torbey (2002) quote Warren Buffett as saying, "Id be a bum in the street with a tin cup if the markets were efficient." Clearly, Warren Buffett believes that markets
are not efficient at all, that it is possible to find and exploit undervalued stocks and so maximize investment return on those stocks. Those subscribing to the concepts of
fundamental analysis "do not heed the advice of the random walkers and believe that markets are weak-form efficient. By believing that prices do not accurately reflect all available information, fundamental
analysts look to capitalize on perceived price discrepancies" (Fundamental Analysis, n.d.). Fundamental Analysis and Valuation In its most basic definition, fundamental analysis is
the systematic examination of forces affecting both macroeconomic and microeconomic organizations and institutions. The goal of fundamental analysis is "to derive a forecast and profit from future price movements.
At the company level, fundamental analysis may involve examination of financial data, management, business concept and competition" (Fundamental Analysis, n.d.). One of the
central points of fundamental analysis at the company level is establishing firm value. There are several legitimate approaches to valuation, each with their own advantages and disadvantages. Valuation
Valuation methods most commonly used include book value; discounted dividend, discounted free cash flow, residual income and abnormal earnings growth models. Book Value Model
In this model, firm value merely equals reported book value. Book value is the accounting value of the firm, or the net
asset value of the firm. It is calculated "by total assets minus intangible assets (patents, goodwill) and liabilities" (Book Value, n.d.). Advantages
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