Question:
By expanding upon Mary Meeker’s work on eBay valuation as discussed in chapter two of your textbook,
Shefrin discusses in details how heuristics, framing, and other psychological factors can affect the way
managers and analysts value companies. He also discusses how calculation of Free Cash Flows could be
manipulated and possibly misused when it comes to arriving at a price for a given stock.
In this question, I want to test your understanding of what exactly Shefrin tries to accomplish in
chapter two through both qualitative and quantitative arguments. To do that, consider that you have been
invited to present a workshop before a group of analysts and managers; and the topic of your discussion is
similar to the discussions presented in chapter two of Shefrin on valuation which involves both concepts and
numbers. I want you to consider and expand upon both the qualitative and quantitative discussions that were
used in that chapter. In this question and based on what was stated in above, your job then is to prepare and
submit to me the needed lecture notes along with any related calculations that you would use in your
presentation. Your submission should then contain a fair amount of conceptual/qualitative materials along
with some supporting quantitative analysis and/or examples. For such a purpose, feel free to use and build
upon the tables and numerical examples that are discussed in chapter 2. Your quantitative analysis would
certainly help the attendees to better understand the points that you want to make in your presentation. For the
conceptual portion of your submission use one (1) Word file and for the quantitative portion use one (1) Excel
file.
Note: Points will be taken off for responses that lack organization and order.
Maximum pages: 4 pages, double-space, size 12 for your Word file. There is no page limit for using tables or
Excel sheets/tabs
Please answer this question using textbook Hersh Shefrin (2007) behavioral corporate finance. The chapter 2 should be the one to look for.
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