How Investment Bankers Calculate Intrinsic Value!

2 years ago
3

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Investment bankers have the extremely important role of setting the initial stock price at a level that will hopefully attract investors to obtain the financing that the company needs. Determining the initial public offering stock prices can be a difficult business, as the investment bank has to handle a delicate balance in pegging a price that will provide maximum funding for their client company, while also attracting a maximum number of investors. If they Price the stock too high, it may fail to attract sufficient investors, but if they price the stock too low, it may fail to provide a sufficient amount of capital. So how do these investment bankers decide what stock price to offer these companies at? While there are a quite a few valuation methods in the finance world, the investment banking community has largely gravitated to what is known as the multiples valuation method also known as the comparables valuation method. In this video we are going to be discussing what the valuation method is, and how to perform one step by step.

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