Learning outcomes

After this module you should be able to:

1. Derive the identities linking the income statement, balance sheet and cash-flow statement, and prove that free cash flow to the firm equals the cash paid to all capital providers.
2. Derive the present value of a growing annuity and a growing perpetuity, and value a company with a two-stage FCFF DCF whose timing convention you can state exactly.
3. Derive the value-driver formula $V = \text{NOPAT}_1(1-g/\text{ROIC})/(\text{WACC}-g)$ and prove that growth adds value if and only if ROIC exceeds WACC.
4. Derive the justified P/E and P/B multiples from the Gordon model and use them to read what a market multiple implies.
5. State the CAPM, sketch its derivation from mean–variance optimisation, and build an INR cost of equity from Damodaran's July 2026 India equity risk premium.
6. Solve a reverse DCF for implied growth by root-finding, and prove the root is unique.
7. Express a margin of safety as a probability statement using a Monte Carlo distribution of intrinsic value, and prove that point estimates understate mean value when value is convex in the discount rate.
8. Compute the Beneish M-score and Piotroski F-score from two years of statements, apply the Coffee Can filter exactly, and run the India red-flag checklist on a real annual report.