Uploaded February 2025 | Updated September 2026, 1 week ago
In this session, we continued with our discussion of sustainable growth, by looking at growth in net income and operating income, using versions of the reinvestment rate and accounting returns for each. We then moved on to building cash flows in a general case, starting with revenue growth, moving on to operating margins and reinvestment, with a sales to capital ratio. With each, we looked the determinants, with Airbnb as an illustrative example. In the final part of the class, we started the discussion of terminal value, by noting that using a terminal multiple undercuts an intrinsic value by making it a forward pricing.
Start of the class test: https://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/tests/growthrate2.pdf
Slides: nyu.box.com/s/nm0kn1renf0enlndo8dhe399e6u6xvsw
Post class test: https://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session11Ctest.pdf
Post class solution: https://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session11Csoln.pdf
In this session, we continued with our discussion of sustainable growth, by looking at growth in net income and operating income, using versions of the reinvestment rate and accounting returns for each. We then moved on to building cash flows in a general case, starting with revenue growth, moving on to operating margins and reinvestment, with a sales to capital ratio. With each, we looked the determinants, with Airbnb as an illustrative example. In the final part of the class, we started the discussion of terminal value, by noting that using a terminal multiple undercuts an intrinsic value by making it a forward pricing.
Start of the class test: https://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/tests/growthrate2.pdf
Slides: nyu.box.com/s/nm0kn1renf0enlndo8dhe399e6u6xvsw
Post class test: https://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session11Ctest.pdf
Post class solution: https://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session11Csoln.pdf
