iiBV 102 – Income Approach and the International Cost of Capital

This course is an introduction to the income approach to value. It is assumed that the student has completed iiBV 101. The purpose of this course is to bring together the concepts and tools of iiBV 101 with the new material of the income approach. After completion of the course, the student will have been introduced to all three approaches to value. This course will also introduce some new concepts necessary to address the correlation and conclusion of value.

The objective of iiBV 102 is to enable students to master the fundamental theory and practice underlying the income approach to value. This basic body of valuation knowledge is common to all countries. After understanding the fundamentals of the income approach students should be capable of adapting the theory to the challenges and issues in specific markets and countries.

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This course covers the income approach methodologies, forecasting and required returns, with specific focus on international cost of capital. The following topics are covered over the three days:

  • Forecasting cash flows
  • Equity vs. invested capital income streams
  • International economics overview
  • Developing the cost of capital
  • Capitalization methods
  • Discounting methods
  • CAPM in volatile markets
  • Discounts and Premiums on Value
  • Goodwill Derivation from En Bloc Value

Several readings are included with the handout material. The readings will be assigned as homework and will be discussed in class. The readings are intended to help the student understand the material presented in the chapter.

It is important to note that this course is introductory in nature. The assumption is that although the student may have limited experience in valuation or in a related financial field, he/she has received no formal valuation training other than IIBV 101. This is not a course in advanced cost of capital techniques.