Your starting question
What is the business worth at this price?
A price is observable; value depends on assumptions. Use several methods, expose their limitations and test how a change in the inputs changes your conclusion.
By the end: Present a valuation range and explain which assumptions matter most.
Try the short baseline. Identify what you need to investigate.
Use diagrams, worked examples and regular choices with feedback.
Work the case in your companion workbook and discuss the trade-offs.
Complete the review and record what changed your mind.
2.2 · Valuation
Define the cash flow
Valuation · the work you will do
- 1Define the cash flow
- 2Make assumptions explicit
- 3Estimate a range
- 4Compare with price
Video coming soon · about 1 minutes
Welcome to Valuation
Use the narration below while the recording is being made, then try the decisions in this lesson.
Read the full narration
Welcome to On Judgement. In Valuation, we will follow four connected steps. Define the cash flow. Then Make assumptions explicit. Then Estimate a range. Then Compare with price. You do not need to know the answers before you start. Make an initial choice, read or watch the explanation, and use the feedback to reconsider. A mistake is useful when you can explain what it revealed. Work on the cases independently or discuss them with your club. Keep longer written responses for the parts where you need to make an argument of your own. By the end, use the evidence and calculations to explain a decision and what could change it.
Investing Skills · Module 2.2
Decide what a business may be worth.
Connect company evidence to price through comparable businesses, cash flows, sensitivities and the sum of the parts.
How to use this module
Work through eight lessons in order, independently or with your club. Each has an opening question, explanations, a worked example, three activities, jargon and five practice checks. Choose an answer on the page, read the feedback and try again where needed. Use the practice lab to rebuild the case, then complete the review and committee note. Allow approximately 6–9 hours including discussion and model work; adjust with your teacher.
- 2.2.1 Introduction to Valuation
- 2.2.2 What Determines a Share Price?
- 2.2.3 Relative Valuation
- 2.2.4 Discounted Cash Flow: Part 1
- 2.2.5 Discounted Cash Flow: Part 2
- 2.2.6 DCF Sensitivities and Scenarios
- 2.2.7 Sum of the Parts
- 2.2.8 Bringing Valuation Together
Before you start · five baseline questions
2.2 Valuation
Connect company evidence to price through comparable businesses, cash flows, sensitivities and the sum of the parts.
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Distinguish a share price from an estimated value.
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Explain price discovery and news relative to expectations.
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Match a valuation numerator to its earnings denominator.
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Calculate present value and distinguish it from NPV.
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Build unlevered free cash flow and a simplified WACC.
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Interpret a discount-rate/growth sensitivity grid.
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Value distinct operations and reconcile consolidated earnings.
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Compare relative, DCF and SOTP estimates on the same share basis.
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Practice lab · Valuation
Rebuild the Harbour case, inspect control totals and practise your committee note.
Rebuild the Harbour case, inspect control totals and practise your committee note.
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Module 2.2 review and final assessment
Twenty questions and an original 15-mark committee case with a balanced-judgement rubric.
Twenty questions and an original 15-mark committee case with a balanced-judgement rubric.