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Valuation

The concept of valuation is the process of determining the price of securities or assets / capital
assets in a company. Valuation for capital assets in the form of securities such as bonds, preferred
shares and ordinary shares in order to see the value of the company. The element of judgment is the
revenue that will be obtained in the future. Valuation is basically also the process of determining the
price of securities or assets / capital assets in a company. The evaluation element is the revenue that
will be obtained in the future. Types of securities is bonds, special shares (Preffered stock) and
common stock.
Bonds are long-term promissory notes (more than 1 year) issued by companies. Bonds have
a nominal value, a certain interest rate and a validity period for a certain period Bond holders or
bondholders are companies that provide loans or creditors or bondholders Investors who buy bonds
have the main goal of getting a return / yield or yield that is expected to be received in the future. And
Preferred stock is a letter of ownership / share which has a certain preference / privilege compared to
ordinary shares. Privileges of preferred shares: dividend payments are fixed per year and are paid
earlier than ordinary stock dividends and the distribution of company assets if the company is
liquidated preferred stock is a hybrid, which means shares that are similar to bonds in some respects
and with ordinary shares in others. Preferred shares pay fixed and regular dividends to their owners
and payments last forever. Preferred stock is a perpetuity.

When valuing a company as a going concern, there are three main valuation methods used
by industry practitioners: (1) DCF analysis, (2) comparable company analysis, and (3) precedent
transactions. First, Comparable company analysis (also called “trading multiples” or “peer group
analysis” or “equity comps” or “public market multiples”) is a relative valuation method in which
you compare the current value of a business to other similar businesses by looking at trading multiples
like P/E, EV/EBITDA, or other ratios. Multiples of EBITDA are the most common valuation method.
Second, Precedent transactions analysis is another form of relative valuation where you compare the
company in question to other businesses that have recently been sold or acquired in the same industry.
These transaction values include the take-over premium included in the price for which they were
acquired. And the last, A DCF analysis is performed by building a financial model in Excel
and requires an extensive amount of detail and analysis. It is the most detailed of the three
approaches, requires the most assumptions, and often produces the highest value. However,
the effort required for preparing a DCF model will also often result in the most accurate
valuation. A DCF model allows the analyst to forecast value based on different scenarios,
and even perform a sensitivity analysis. For larger businesses, the DCF value is commonly a
sum-of-the-parts analysis, where different business units are modeled individually and added
together.