Damodaran on Valuation

"That is the equivalent of playing a very expensive game of musical chairs in which every investor has to answer the question, "Where will I be when the music stops?""

"The key error to avoid is mismatching cash flows and discount rates."

"In terms of risk, preferred stock is safer than common equity but riskier than debt."

"The primary benefit from depreciation is a tax benefit."

"This superiority in forecasting is surprisingly small for long term forecasts."

"The primary problem in valuing firms with product options is not that they are ignored but that they are often double counted."

"When comparisons are made across firms, differences in risk, growth rates, and payout ratios have to be controlled for explicitly."

"Since the book value of an asset reflects its original cost, it might deviate significantly from market value if the earning power of the asset has either increased or declined significantly since its acquisition."

"One of the advantages of using the revenue instead of earnings and book value is its stability. This stability can also become a disadvantage when the firm's problems lie in cost control."

"While the theory relating investment decisions to firm value is straightforward, the effect of such decisions on market prices is not as clear-cut."

"A firm can reduce the variability in its earnings by diversifying into other industries."

"Since the buyer of an option pays the price of the option up front, there is an opportunity cost involved."

"Stockholders and bondholders have different objective functions, and this can lead to agency problems, where stockholders can expropriate wealth from bondholders."