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TitleStreetsmart guide to valuing a stock: the savvy investors key to beating the market
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LanguageEnglish
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Total Pages289
Table of Contents
                            Streetsmart Guide to
 Valuing a Stock
	Streetsmart Guide to 
Valuing a Stock
		Copyright
		Contents
		Preface
		Acknowledgments
	CHAPTER 1 INTRODUCTION AND OVERVIEW
		Financial Flameout
		Good Companies ¡ª Hot Stocks ¡ª Ridiculous Prices
		The Investment Decision
		The 10 Principles of Finance
		Overview of the Book
		Notes
	CHAPTER 2 THE 10 PRINCIPLES OF FINANCE AND HOW TO
USE THEM
		Principle 1: Higher Returns Require Taking More Risk
		Principle 2: Efficient Capital Markets Are Tough to Beat
		Principle 3: Rational Investors Are Risk Averse
		Principle 4: Supply and Demand Drive Stock
		Prices in the Short Run
		Principle 5: When Analyzing Returns, Simple Averages Are Never Simple
		Principle 6: Transaction Costs, Taxes, and Inflation Are Your Enemies
		Principle 7: Time and the Value of Money Are Closely Related
		Principle 8: Asset Allocation Is a Very Important Decision
		Principle 9: Asset Diversification Will Reduce Risk
		Principle 10: An Asset Pricing Model Should Be Used to Value Investments
		Summary
		Notes
	CHAPTER 3 STOCK VALUATION: SOME PRELIMINARIES
		Introduction to Valuation
		DCF Stock Valuation
		We Caused the High- Tech Bubble
		Return to Stockholders
		Stock Price ¡ª Too High? ¡ª Too Low? ¡ª Just Right?
		Stock Valuation ¡ª Art, Science, or Magic?
		Stock Valuation Approaches: Fundamental,Technical, and MPT
		Stock Value, Stock Price, and Emotions
		Stock Value, Stock Price,and Analyst Recommendations
		When to Buy, When to Sell: Our Recommendation
		Where Do We Go Next?
		Notes
	CHAPTER 4 HOW TO VALUE A STOCK
		Some Definitions Relating to Cash Flow
		The Free Cash Flow to the Firm Approach
		Why DCF and Not EPS?
		The Discounted FCFF Valuation Approach
		Microsoft ¡ª A Simple DCF Example
		Valuation—Growth versus Value, Large Cap
 versus Small Cap
		Valuation ¡ª The Next Step
		Notes
	CHAPTER 5 FORECASTING EXPECTED CASH FLOW
		The Five Chinese Brothers
		Growth Rates and the Excess Return Period
		Net Operating Profit Margin and NOP
		Income Tax Rate and Adjusted Taxes
		Net Investment
		Incremental Working Capital
		Free Cash Flow to the Firm
		Valuation Exercise: Estimating Free Cash Flow for Cisco
		Notes
	CHAPTER 6 ESTIMATING THE COST OF CAPITAL
		Don¡¯t Count Until You Discount
		WACC and Market Capitalization
		Estimating ConEd¡¯s WACC
		The Cost of Common Equity and Shares Outstanding
		The After- Tax Cost of Debt and Debt Outstanding
		The Cost of Preferred Stock and Amount Outstanding
		WACC Calculation ¡ª ConEd
		WACC Calculation ¡ª Cisco
		Balance Sheet Items in the Valuation Process:Our Recommendation
		Valuation Exercise: Cisco
		After the Cost of Capital ¡ª The Next Step
		Notes
	CHAPTER 7 FINDING INFORMATION FOR VALUATIONS
		Save a Tree ¡ª Use the Internet
		The Internet and Investment Information
		Cash Flow Valuation Inputs ¡ª Easy to Find
		Cash Flow Valuation Inputs Requiring Estimation
		Cost of Capital Valuation Inputs
		Custom Valuations ¡ª The Next Step
		Valuation Exercise: Cisco
		Notes
	CHAPTER 8 VALUING A STOCK—PUTTING IT ALL TOGETHER
		Overview
		Valuing Citigroup ¡ª December 17, 2002
		Valuing Merrill Lynch ¡ª December 18, 2002
		Valuing Berkshire Hathaway ¡ª December 18, 2002
		Valuing Washington REIT ¡ª December 20, 2002
		Summary
		Notes
	Glossary
	Acronyms
	Bibliography
	Index
	About the Authors
                        
Document Text Contents
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by Irwin Professional Publishing in October, 1994. He is an avid fly fisher-
man and runs the encierro each July in Pamplona, Spain.

Patrick J. Cusatis, Ph.D. is an Assistant Professor of Finance at The Penn-
sylvania State University at Harrisburg and is a consultant to financial in-
stitutions. Previously Dr. Cusatis was with Lehman Brothers, First Union
Capital Markets, and Tucker Anthony Sutro and specialized in new prod-
uct development, quantitative techniques, and hedging strategies. He was
responsible for the financial modeling and implementation of Muni
CHOPs, BPOs, Residual Interest Bonds (RIBs)/Select Auction Rate Variable
Securities (SAVRs) Program; and a secondary market program using lev-
ered RIBs/SAVRs. Dr. Cusatis also was responsible for developing a call-
valuation strategy model for issuers with multiple series of municipal
bonds outstanding.

Dr. Cusatis has published articles in the Journal of Financial Econom-
ics, the Journal of Applied Corporate Finance, and the Municipal Finance
Journal. He is coauthor, along with Gary Gray, of Municipal Derivative
Securities: Uses and Valuation. He is an avid fly fisherman, hunter, and
antique collector.

J. Randall Woolridge, Ph.D. is the Goldman, Sachs & Co. and Frank P.
Smeal Endowed University Professor of Finance at The Pennsylvania State
University. His teaching and research interests are in corporate finance
with an emphasis on the valuation consequences of corporate strategic in-
vestment and financial decisions. He has won the Excellence in Teaching
Award at the Penn State MBA Program. Dr. Woolridge has also participated
in over 300 executive development programs in more than 20 countries in
North and South America, Europe, Asia and Africa. His specialty areas in
executive programs include: corporate financial management and strat-
egy, financial engineering, security analysis, and creating shareholder
value. He has consulted for numerous corporate clients including: AT&T,
Merrill Lynch, Goldman Sachs, Morgan Stanley, Bankers Trust, Paine
Webber, Bank of Boston, and Knight Ridder, among others.

Dr. Woolridge has published over 25 articles in leading academic and
professional journals including: the Journal of Finance, the Journal of
Financial Economics, and the Journal of Applied Corporate Finance. His
research has been highlighted extensively in the financial press, including:
The New York Times, The Wall Street Journal, Barron’s, Fortune, Forbes,
and Business Week. He has appeared on CNN’s Money Line and CNBC’s
Business Today. Dr. Woolridge is an avid marathon runner and soccer
player.

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