Valuation: Measuring and Managing the Value of Companies / Edition 5

Valuation: Measuring and Managing the Value of Companies / Edition 5

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by McKinsey & Company Inc., Tim Koller, Marc Goedhart, David Wessels
     
 

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ISBN-10: 0470424656

ISBN-13: 9780470424650

Pub. Date: 08/10/2010

Publisher: Wiley

Corporate finance is simpler and more intuitive than most people think. Yet, executives frequently make decisions that defy the core principles and their own intuition. They subscribe to the common wisdom of "The Street" instead of simple, common financial sense.

McKinsey's Valuation: Measuring and Managing the Value of Companies, Fifth Edition,

Overview

Corporate finance is simpler and more intuitive than most people think. Yet, executives frequently make decisions that defy the core principles and their own intuition. They subscribe to the common wisdom of "The Street" instead of simple, common financial sense.

McKinsey's Valuation: Measuring and Managing the Value of Companies, Fifth Edition, provides the knowledge executives need to make value-creating decisions—replacing some of the myths that pervade the corporate world with proven principles of value creation.

Thoroughly revised and expanded to reflect business conditions in today's volatile global economy, Valuation, Fifth Edition provides up-to-date insights and practical advice on how to create, manage, and measure the value of an organization. Along with all new case studies that illustrate how valuation techniques and principles are applied in real-world situations, this comprehensive guide has been updated to reflect the events of the real estate bubble and its effect on stock markets, new developments in corporate finance, changes in accounting rules, and an enhanced global perspective.

Valuation, Fifth Edition is filled with expert guidance that managers at all levels, investors, and students have come to trust. It contains a solid framework for valuation:

  • Analyzing historical performance, including reorganizing a company's financial statements to reflect economic rather than accounting performance
  • Forecasting performance, with emphasis on not just the mechanics of forecasting but also how to think about a company's future economics
  • Estimating the cost of capital with practical tips that aren't found in textbooks
  • Interpreting the results of a valuation in light of a company's competitive situation
  • Linking a company's valuation multiples to the core drivers of its performance

Hailed by financial professionals worldwide as the single best guide of its kind, Valuation, Fifth Edition remains true to its roots, with an extensive discussion on the complexity of measuring corporate performance to assess historical financial results properly and to gain insight into a company's ability to create value in the future (its corporate "health").

At the crossroads of corporate strategy and finance lies valuation. Filled with expert guidance and reliable advice, Valuation, Fifth Edition enables everyone from the budding professional to the seasoned manager to excel at measuring, managing, and maximizing shareholder and company value.

Product Details

ISBN-13:
9780470424650
Publisher:
Wiley
Publication date:
08/10/2010
Series:
Wiley Finance Series, #497
Pages:
840
Product dimensions:
7.30(w) x 10.00(h) x 1.90(d)

Table of Contents

About the Authors ix

Preface xi

Acknowledgments xv

Part One Foundations of Value

1 WhyValueValue? 3

2 Fundamental Principles of Value Creation 17

3 Conservation of Value and the Role of Risk 35

4 The Alchemy of Stock Market Performance 49

5 The Stock Market Is Smarter Than You Think 65

6 Return on Invested Capital 93

7 Growth 115

Part Two Core Valuation Techniques

8 Frameworks for Valuation 135

9 Reorganizing the Financial Statements 165

10 Analyzing Performance 201

11 Forecasting Performance 221

12 Estimating Continuing Value 247

13 Estimating the Cost of Capital 269

14 Moving from Enterprise Value to Value per Share 301

15 Analyzing the Results 321

16 Using Multiples 331

17 Valuation by Parts 353

Part Three Advanced Valuation Techniques

18 Taxes 373

19 Nonoperating Items, Provisions, and Reserves 387

20 Leases and Retirement Obligations 405

21 Alternative Ways to Measure Return on Capital 423

22 Inflation 445

23 Cross-Border Valuation 459

24 Case Study: Heineken 481

Part Four Managing for Value

25 Corporate Portfolio Strategy 525

26 Performance Management 543

27 Mergers and Acquisitions 565

28 Divestitures 593

29 Capital Structure, Dividends, and Share Repurchases 611

30 Investor Communications 643

Part Five Special Situations

31 Emerging Markets 667

32 Valuing High-Growth Companies 691

33 Cyclical Companies 705

34 Banks 713

35 Flexibility 741

Appendix A Discounted Economic Profit Equals Discounted Free Cash Flow 775

Appendix B Derivation of Free Cash Flow, Weighted Average Cost of Capital, and Adjusted Present Value 781

Appendix C Levering and Unlevering the Cost of Equity 787

Appendix D Leverage and the Price-to-Earnings Multiple 795

Appendix E Other Capital Structure Issues 799

Appendix F Technical Issues in Estimating the Market Risk

Premium 805

Index 809

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