The main objective of this chapter is for students to demonstrate that they can identify how heuristics and framing affect the way managers and analysts value firms.

After completing this chapter students will be able to:

1. Explain why some financial executives and analysts rely on valuation heuristics instead of textbook techniques that emphasize intrinsic value.
2. Describe the main heuristics that financial executives and analysts use tocompute value.
3. Identify the biases that arise in connection with the use of valuation heuristics.
4. Identify the biases that arise in connection with the use of traditional textbook techniques that emphasize intrinsic value.