Aswath Damodaran Session 23: Distressed Equity as an option

Published on Dec 2, 2015

We started today’s class by looking at valuing the option to abandon, and how being able to get out of a commitment can add value to it. We then looked at financial flexibility as an option, and argued that it was worth more to capital-constrained companies with unpredictable and high-value-added investments. We continued with our examination of equity in trouble, debt-laden companies. Given that the equity in these companies takes on the characteristics of an option, we teased out implications for investing in risky projects, financing and conglomerate acquisitions.

Start of the class test: www.stern.nyu.edu/~adamodar/pdfiles/eqno­tes/tests/realoptions2mod.pdf
Slides: http://www.stern.nyu.edu/~adamodar/po…
Post class test: http://www.stern.nyu.edu/~adamodar/pd…
Post class test solution: http://www.stern.nyu.edu/~adamodar/pd…

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