Essays in company valuation

Abstract: This dissertation focuses on models for company (equity) valuation. Company valuation has many interacting components. Essay 1, On the Fundamentals of Company Valuation, discusses the different roles of these components and shows how their interaction can be captured in a valuation framework. Essay 2, Looking Beyond the Horizon, is devoted to problems connected with horizon (terminal) value estimations. Essay 3, Company Valuation with a Periodically Adjusted Cost of Capital, shows how the cost of equity and the weighted average cost of capital can be simultaneously adjusted to reflect varying capital structures. The main contribution of Essay 4, On the General Equivalence of Company Valuation Models, is the specification of a company valuation framework that ensures that the free cash flow, dividend, abnormal earnings, economic value added and adjusted present value models are all equivalent. One characteristic of the framework is that it explicitly links the specification of discount rates to the anticipated future development of the company. Moreover, the results highlight the reasons for why the different models can produce different value estimates in practical applications.