Company Valuation

The objective of the course is to enable students to achieve a systematic and in-depth understanding of the theoretical, methodological, and practical foundations of the valuation of enterprises, capital, and assets, as well as to master methodologies for addressing one of the most complex problems in microeconomics – the valuation of a company. The course is focused on acquiring contemporary valuation approaches in accordance with International Valuation Standards, through the integration of financial analysis, financial statement projections, risk assessment, and the determination of discount rates. A specific objective of the course is to prepare students for independent, analytical, and critical valuation of companies under various business and market conditions, including inefficient and underdeveloped capital markets, loss-making companies, companies facing bankruptcy, and companies that are not publicly traded.

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Upon completion of the course, students will be able to understand the concept and significance of company value, as well as to apply relevant regulations, professional standards, and methodologies in the process of determining company value. Students will be able to analyse the earning capacity, asset and financial position, financial performance, and growth prospects of a company based on financial statements and cash flow projections. They will develop the ability to apply different approaches and methods of company valuation, including the income, market, and cost approaches, with appropriate consideration of risk, discount rates, and market conditions. Students will be qualified to assess company value in specific situations, such as inefficient capital markets, loss-making companies, companies undergoing restructuring or bankruptcy, and companies that are not publicly traded. Finally, students will be able to independently prepare and interpret a professional company valuation report, with a critical explanation of the assumptions, methods, and valuation results.

Conceptual distinctions related to value; the subject and purpose of valuation; bases of value; the historical development of valuation theory and practice; the regulatory framework and IVS; professional valuation organizations; the role of the appraiser, professional responsibility, and ethical principles; procedural activities and the recommended form and content of a company valuation report. The valuation process: data collection and analysis of financial statements; financial analysis – analysis of earning capacity, asset position, and financial position; the Z-Score model and assessment of company creditworthiness; creative accounting and its impact on valuation.
The income approach to valuation: cash flow discounting methods (dynamic methods: DCF, EVA) and static methods; projection of the balance sheet, income statement, and net cash flows; projection of residual (terminal) value. Cost of capital as the discount rate: cost of equity (CAPM, build-up model) and cost of debt; weighted average cost of capital (WACC).
The market approach to valuation: the multiplier method based on comparable transactions and comparable companies.
The cost (asset-based) approach to valuation: net asset value method, capitalized excess earnings method, liquidation value method, adjusted book value, and asset value.
Tests of the acceptability of the estimated capital value; valuation of loss-making companies; valuation of companies facing bankruptcy; valuation of non-publicly traded companies; valuation of companies operating in developing capital markets.
Discounts and premiums; capital markets, market inefficiency, and valuation; the relationship between value, market activity, and capital market liquidity.

Teaching methods include lectures, practical exercises, independent seminar papers prepared under the supervision of the instructor, regular and e-consultations, discussions of real-world business cases, case studies, and interactive exercises developed by students. Lectures and practical sessions are based on two-way communication, with the aim of facilitating students’ understanding of course content through practical examples, illustrations, and concrete problem-solving tasks.

Colloquium I (0-20 points); Colloquium II (0-20 points); Final exam (0-50 points); Attendance (2point); Class activities (seminar papers, discussions, case studies) (0-8 points)

Required Literature:

Serdar Raković, Tajana. (2020). Procjena vrijednosti preduzeća. Osvrt na neaktivna tržišta kapitala. Ekonomski fakultet Univerziteta u Banjoj Luci.
Mikerević, D. (2009). Principi i praksa procjene vrijednosti preduzeća. Finrar
IVSC. (2025). International Vauation Standards. London, UK: IVSC.

Recommended Literature:

Damodaran, A. (2012). Investment Valuation: Tools and Techniques for Determining the Value of Any Asset. 3rd Ed. John Wiley and Sons.
Mikerević, D. (2018). Finansijski menadžment. Ekonomski fakultet i Finrar.
Pratt, S. P., & Niculita, A. V.(2008). Valuing a Business. The Analysis and Appraisal of Closeely Held Companies. The McGraw-Hill Companies.
Pratt, S. & Grabowski, R. J. (2008). Cost of Capital: Estimation and Applications. 3rd Ed. John Wiley and Sons.
Koller, T., Goedhart, M. & Wessels, D. (2015). Valuation: Measuring and Managing the Value of Companies. McKinsey & Company Inc.,

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