In this class, we started with a look at betas, with a skeptical look at its underlying assumptions, and alternatives to it, for those who cannot live with its assumptions. We then looked at the pitfalls of regression betas. They are backward-looking, noisy and subject to game playing. We went on to talk about bottom up betas, focusing on defining comparable firms and expanding the sample. I did make a big deal about bottom up betas, but may have still not convinced you or left you hazy about some of the details. If so, I thought it might be simpler to just send you a document that I put together on the top ten questions that you may have or get asked about bottom up betas. I think it covers pretty much all of the mechanics of the estimation process, but I am sure that I have missed a few things. www.stern.nyu.edu/~adamodar/New_Home_Page/TenQs/TenQsBottomupBetas.htm In the next session, we will talk about cost of debt. Start of the class test: www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/tests/beta.pdf Slides: www.stern.nyu.edu/~adamodar/podcasts/valUGspr21/session7slides.pdf Post class test: www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session7Atest.pdf Post class test solution: www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session7Asoln.pdf

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