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Valuing Firms and Projects
This lecture covers the main method for valuing firms and projects, which is discounting cash flows (DCF method). It explains the four steps to determine firm/project value, including estimating free cash flows, discount rate, and terminal value. The importance of using cash flows rather than earnings in finance is emphasized, with a detailed explanation of the adjustments needed to convert earnings to cash flows. The lecture also delves into the principles governing accounting earnings measurement and the impact of financing on cash flows. Various examples and calculations are provided to illustrate the concepts discussed.