As discussed on pp. 234-235, how does valuation imply value judgments. What are the steps in the valuation process?
The process of simplification in valuation encapsulates and hides many small and large value judgments.
1. The steps in the valuation process Is to decide what you are valuing. .. only those alternatives that are identified for comparison an eventually become the decision executed.
2. Identify assumptions required for the financial model. These assumptions drive the valuation process and are , in fact , value laden decisions
3. Valuation is an iterative process. Initial findings are presented, feedback is incorporated and the process begins again
4. Taking the assumptions and options and creating a model requires an understanding of the constructed value… for each valuation model, profits, free cash flow, long-term market value, we need to identify the stakeholders.
5. Defining the stakeholders, whom do we involve in the process? Who needs to be involved from the creation of the assumptions? Who needs to be involved during the construction of the model? Who needs to be in the presentation of the initial findings
6. Once the financial model has been created, the presentation of initial findings constitutes the decision making process
- assumptions, valuations, and alternatives. Pg 238