This document discusses different approaches to valuation, including project valuation, asset valuation, liabilities valuation, earnings valuation, equity valuation, debt valuation, and firm valuation. It provides details on each approach, including what types of companies each approach is most suitable for. For example, asset valuation looks at tangible and intangible assets and is suitable for software, R&D, and holding companies, while debt valuation is appropriate for banks, infrastructure, construction, and capital-intensive industries. The document also provides key valuation formulas and definitions.

1. Valuation Approaches & Techniques
Dr S S N Raju Indukoori

2. Types
1. Project Valuation
2. Asset Value
3. Liabilities Value
4. Earnings Value
5. Equity Value
6. Debt Value
7. Firm Value
Dr Raju Indukoori

3. Project Valuation
• Capital Budgeting
• Cash Inflows
• Cash Outflows
• Timing of cash flows
Dr Raju Indukoori

4. Asset Valuation
• Tangible Assets
• Intangible Assets
Dr Raju Indukoori

5. Asset Valuation
In Tangible Assets: Patents, copy rights, royalty,
investment in financial assets. More suitable to
• Soft ware companies
• R&D Companies like pharmaceutical
• Stock holding companies
Dr Raju Indukoori

6. Asset Valuation
Tangible Assets: Machine, Land, Subsidiary,
Division, department,
• Liquidity value is done for insolvent or loss
making company based on book value of
market value of the tangible assets
• For a profitable company Earnings approach is
more suitable
Dr Raju Indukoori

7. Liability Valuation
This is apt for those companies which are
• Sick units
• Loss making
• Filed insolvency petition
Dr Raju Indukoori

8. Earnings Valuation
• It can be referred to Corporate earnings, Asset
earnings and Project Earnings.
• Earnings refer to cash inflows (CIF), Gross
profit, Operational Profit, EBIT and PBIT.
• This applicable to a company which is not
listed and earnings are known .
Dr Raju Indukoori

9. Debt Valuation
Suitable for companies burdened with debt like
• Banks
• Infrastructure
• Construction
• Real Estate
• Capital Intensive goods industry
Dr Raju Indukoori

10. Equity Valuation
Suitable for 100% equity or zero debt firms
which are listed. Service oriented companies like
• Stock holding or investments
• Soft ware
• Tourism and hospitality
Dr Raju Indukoori

11. Firm Valuation
• Firm Value(Vf) = Ve + Vd
• Firm Value (Vf) = DFCIF – Liabilities
• Equity Value = Vf - Vd
• Debt Value = Vf - Ve
Where
• Vf = Firm Value
• Vd = Debt Value
• Ve = Equity Value
• DFCIF = Discounted free cash inflows
Dr Raju Indukoori

12. Equity Valuation
Where
• Vf = Firm Value
• Vd = Debt Value
• Ve = Equity Value
• DFCIF = Discounted future cash inflows
Dr Raju Indukoori