Corporate finance chapter 07 principles of asset valuation

Chapter 7: Principles of Asset Valuation Objective Explain the principles of asset evaluation... Feature Differential Old sale of this work Recent sale of unrelated work Recent well-matc

Chapter 7: Principles of

Asset Valuation

Objective

Explain the principles of

asset evaluation

Chapter 7 Contents

• 1 The relationship between

an asset’s value & price

• 2 Value maximization &

financial decisions

• 3 The law of one price &

arbitrage

• 4 Arbitrage & the law of

one price

• 5 Interest rates & the law

of one price

• 6 Exchange rates &

triangular arbitrage

• 7 Valuation using

comparables

• 8 Valuation Models

• 9 Accounting measures of

value

• 10 How information is reflected in security prices

• 11 The efficient markets

Triangular Arbitrage

UK ¥100/$ or $0.01/¥

£0.005/¥ or ¥200/£ $2/£ or £0.5/$

Triangular Arbitrage

• RA/C = RA/B * RB/C

Triangular Arbitrage

Feature Differential

Old sale of this work

Recent sale of unrelated work

Recent well-matched sale