Kooperativer Bibliotheksverbund

UID:

Format: 1 online resource (519 p.)

Edition: 1st edition

ISBN: 0-12-802543-3

Content: Valuation: Theories and Concepts provides an understanding on how to value companies that employ non-standard accounting procedures, particularly companies in emerging markets and those that require a wider variety of options than standard texts provide. The book offers a broader, more holistic perspective that is perfectly suited to companies and worldwide markets. By emphasizing cases on valuation, including mergers and acquisition valuation, it responds to the growing expectation that students and professionals must generate comprehensive perspectives based on thorough investigations and a library of valuation theories. Readers will gain a better understanding of the development of complete analyses, including trend analysis of financial parameters, ratio analysis, and differing perspectives on valuation and strategic initiatives. Case studies include stock market performance and synergies and the intrinsic value of the firm are compared with offer price. In addition, full data sets for each chapter are available online. Provides an understanding on how to value companies that employ non-standard accounting procedures, particularly companies in emerging markets Gives readers the ability to compare the intrinsic value of the firm with the offer price Showcases a variety of valuation techniques and provides details about handling each part of the valuation process Each case has data in excel spreadsheets for all companies, and data sets for each chapter are available online

Note: Description based upon print version of record. , Front Cover -- Valuation -- Copyright Page -- Dedication -- Contents -- Preface -- Acknowledgments -- I. Theories and Concepts -- 1 Perspectives on value and valuation -- 1.1 Introduction -- 1.2 Application of valuation -- 1.3 Approaches to valuation -- 1.4 Steps in value creation -- 1.5 Value drivers -- 1.6 Empirical evidence on value drivers -- 1.7 Strategic models of valuation -- 1.8 Stock price maximization -- 1.8.1 Shareholder value and wealth creation -- 1.8.2 Value drivers for shareholder wealth creation -- 1.8.3 Measures of shareholder value creation -- 1.8.3.1 Economic value -- 1.8.3.2 Equity spread -- 1.8.3.3 Implied value -- 1.8.3.4 Cash flow return on investment (CFROI) -- 1.8.4 Measures of shareholder wealth creation -- 1.8.5 Hybrid wealth creation measure -- 1.8.5.1 Market value added (MVA) -- 1.9 Linkage between strategic management and shareholder value -- 1.9.1 Value-based management -- 1.9.2 Significance of shared value -- 1.9.3 Intangibles -- 1.9.4 Valuation of intangibles -- 1.9.4.1 Market approach -- 1.9.4.2 Cost approach -- 1.9.4.3 Income method -- 1.9.4.4 Calculated intangible value (CIV) -- 1.9.5 Brand value -- 1.9.6 Brand valuation -- 1.10 Challenges in valuing intangibles -- 1.11 Innovation and value creation -- 1.12 Review of research studies on usage of valuation methods -- 1.13 Challenges for valuation -- 1.14 Review on theories of valuation -- 1.15 Most valuable companies -- Appendix: Financial statement analysis -- Sources and uses of cash -- Cash flow identity -- Measures of cash flow -- Common size statements -- Common base year statements -- Ratio analysis -- Short-term solvency or liquidity measures -- Current ratio -- Quick or acid test ratio -- Absolute liquid or cash ratio -- Profitability measures -- Net profit margin -- Return on assets (ROA) -- Return on capital employed (ROCE) -- Return on equity (ROE). , Long-term solvency measures -- Earnings and cash flow coverage ratios -- Interest coverage ratio -- Cash coverage ratio -- Operational efficiency or asset utilization ratios -- Inventory turnover ratio -- Receivables turnover ratio -- Market value measures -- Du Pont system -- Business risk -- Analysis of growth potential -- Analysis of bank performance -- Profitability measures -- Efficiency measures -- Expense measures -- Leverage ratios -- Asset quality -- Management quality -- Limitations of ratio analysis -- Links for websites for financial analysis -- Fundamentals of valuation -- Time value of money -- Future value and compounding -- Present value and discounting -- Discounted cash flow valuation -- Annuities -- Perpetuities -- Growing annuity -- Continuous compounding -- Different types of interest rates -- Nominal or stated interest rate -- Annual percentage rate -- Periodic rate -- Effective annual rate -- Different types of loans -- Pure discount loans -- Interest only loans -- Amortized loans -- Bond valuation and interest rates -- Basics of bonds -- Features of bond -- Indenture -- Bond terminology -- Par value -- Coupon and coupon rate -- Maturity date -- Yield to maturity (YTM) -- Current yield -- Yield to call -- Premium and discount bond -- Value of bond -- Interest rates -- Term structure of interest rates -- Bond ratings -- Bond pricing theorems -- Duration theorems -- Basics of stock valuation -- Summary highlights of stock valuation -- General method -- Constant growth method -- Nonconstant growth -- Two stage growth -- References -- 2 Risk and return -- 2.1 Introduction -- 2.2 Accounting and risk measures -- 2.3 Measures of returns -- 2.3.1 Total return -- 2.3.2 Historical rates of return -- 2.3.3 Average returns -- 2.3.4 Expected return -- 2.3.5 Portfolio returns -- 2.3.6 Determinants of rate of return -- 2.4 Risk premium. , 2.4.1 Classification of risks -- 2.4.2 Diversification -- 2.4.3 Risk measures -- 2.4.3.1 Variance and standard deviation -- 2.4.3.2 Coefficient of variation -- 2.4.4 Portfolio risk -- 2.4.5 Sharpe ratio -- 2.4.5.1 Beta as a measure of systematic risk -- 2.4.5.2 Beta estimation -- 2.5 Models of risk and return -- 2.5.1 Mean-variance optimization and modern portfolio theory -- 2.5.2 Capital market theory -- 2.5.3 Capital asset pricing model -- 2.5.3.1 Arbitrage -- 2.5.4 Arbitrage pricing theory -- 2.5.5 Multifactor models -- 2.5.6 Fama French three factor model -- 2.5.7 Review of empirical research on models of risk and return -- 2.5.8 Bond ratings -- 2.5.9 Determinants of bond ratings -- References -- 3 Efficient capital markets and its implications -- 3.1 Introduction -- 3.2 Forms of efficient market hypothesis -- 3.2.1 Weak form of efficient market -- 3.2.2 Semi-strong form of efficient market -- 3.2.3 Strong form of efficient market -- 3.3 Tests of EMH -- 3.3.1 Tests for weak form of EMH -- 3.3.2 Tests for semi-strong form of EMH -- 3.3.2.1 Event study -- 3.3.2.1.1 Announcement effects on stock splits -- 3.3.2.1.2 Announcement effects on mergers and acquisitions -- 3.3.2.1.3 Announcement effect on initial public offerings -- 3.3.2.1.4 Announcement effects on economic events -- 3.3.2.1.5 Dividend announcements -- 3.3.2.2 Event study methodology -- 3.3.2.2.1 Market model method -- 3.3.2.2.2 The market-adjusted return method -- 3.3.3 Tests of strong form EMH -- 3.4 Review of research studies on market efficiency -- 3.5 Anomalies of EMH -- 3.6 Implications of EMH -- 3.7 Behavioral finance -- References -- 4 Estimation of cost of capital -- 4.1 Introduction -- 4.1.1 Risk-free rate -- 4.1.2 Risk premium -- 4.1.2.1 Estimation of ERP -- 4.1.2.2 Other perspectives on estimation of market risk premium -- 4.1.2.2.1 Unconditional MRP. , 4.1.2.2.2 Conditional MRP -- 4.1.2.3 Research discussions on ERP -- 4.1.2.4 Variations in risk premium estimations -- 4.1.2.5 Risk premiums in other markets -- 4.1.2.5.1 Estimation of country risk premium from default spread -- 4.1.2.5.2 Country risk premium from volatility of stock prices -- 4.1.2.5.3 Estimation of default spread from bonds -- 4.1.3 Estimation of cost of equity -- 4.1.4 Beta estimation -- 4.1.4.1 Historical beta estimation -- 4.1.4.1.1 Regression beta calculation -- 4.1.4.2 Fundamental beta estimation -- 4.1.4.2.1 Fundamental beta -- 4.1.4.2.2 Determinants of beta -- 4.1.4.2.3 Bottom-up approach for beta estimation -- 4.1.4.2.4 Steps in bottom-up beta estimation -- 4.1.4.3 Accounting betas -- 4.1.5 Cost of equity -- 4.1.6 Cost of capital -- 4.1.6.1 Cost of debt calculation -- 4.1.6.2 Cost of preferred stocks -- 4.1.6.2.1 Estimation of Weighted Average Cost of Capital (WACC) -- 4.1.6.2.2 Estimation of values of capital components -- 4.1.6.2.3 Estimations of components of debt capital -- 4.1.7 Estimation of cost of capital-industry practices -- 4.1.8 Estimation of WACC-Johnson & -- Johnson -- 4.1.8.1 Estimation of cost of capital of Chevron corporation -- References -- 5 Principles of cash flow estimation -- 5.1 Introduction -- 5.2 Adjustments to financial statements -- 5.2.1 Invested capital -- 5.2.2 Debt -- 5.2.3 Equity -- 5.2.4 Return on Invested Capital -- 5.2.5 Free cash flow -- 5.2.6 Operating working capital -- 5.2.7 Net capital expenditure -- 5.2.8 Provisions and reserves -- 5.2.9 Earnings adjustments -- 5.3 Adjustments of expensed investments -- 5.3.1 Adjustment for financing expenses: case of operating leases -- 5.3.2 Adjustment for operating lease: case of IBM in 2013 -- 5.3.3 Summary of adjustments for operating income -- 5.4 Reflections on managed earnings -- 5.4.1 Tax effect on valuation. , 5.5 Estimating reinvestment needs for valuation -- 5.5.1 Net capital expenditures -- 5.5.2 Working capital investments -- 5.5.3 Estimation of net capital expenditure for China National Petroleum Corporation -- 5.6 Forecasting growth -- 5.6.1 Revenue forecast models -- 5.6.2 Forecast of income statement items -- 5.6.3 Forecast of balance sheet items -- 5.6.3.1 Estimation of historical growth rates to forecast future growth -- 5.6.3.2 Analysts estimation of growth rates -- 5.6.3.3 Estimation of growth rate through fundamentals -- 5.6.3.3.1 Estimation of growth rate of EPS: Apple Inc -- 5.6.3.3.2 The growth rate in EPS can also be estimated through fundamentals -- 5.6.3.3.3 Estimation of growth rate of net Income: Apple Inc -- 5.6.3.3.4 Estimation of expected growth rate of net income: Apple Inc -- 5.6.3.3.5 Estimation of growth rate of Indian Oil Corporation -- 5.6.3.3.6 Estimation of growth rate from fundamentals -- 5.6.3.3.7 Estimation of growth rate in net income -- 5.6.3.3.8 Estimation of growth rate in operating income -- References -- 6 Discounted cash flow valuation models -- 6.1 Introduction -- 6.2 Dividend discount model -- 6.2.1 Special cases of DDM -- 6.2.1.1 The constant growth DDM (Gordon growth model) -- 6.2.1.2 Two-stage DDM model -- 6.2.1.3 Financial characteristics of high growth and stable growth firms -- 6.2.1.4 Two-stage H-model -- 6.2.1.5 Three-stage dividend growth model -- 6.2.2 Reflections on terminal value -- 6.2.3 Practical difficulties in estimation of parameters in the DCF models -- 6.2.4 Research studies related to DDM -- 6.2.5 Estimation of value of ICBC through dividend models -- 6.2.5.1 Valuation of ICBC using the stable DDM model -- 6.2.5.2 Estimation of growth rate from fundamentals -- 6.2.5.3 Valuation of ICBC using the two-stage DDM model -- 6.2.6 Valuation of Reliance Industries Ltd using DDM. , 6.2.6.1 Estimation of value of equity. , English

Additional Edition: ISBN 0-12-802303-1

Language: English

UID:

Format: 1 online resource (519 p.)

Edition: 1st edition

ISBN: 0-12-802543-3

Content: Valuation: Theories and Concepts provides an understanding on how to value companies that employ non-standard accounting procedures, particularly companies in emerging markets and those that require a wider variety of options than standard texts provide. The book offers a broader, more holistic perspective that is perfectly suited to companies and worldwide markets. By emphasizing cases on valuation, including mergers and acquisition valuation, it responds to the growing expectation that students and professionals must generate comprehensive perspectives based on thorough investigations and a library of valuation theories. Readers will gain a better understanding of the development of complete analyses, including trend analysis of financial parameters, ratio analysis, and differing perspectives on valuation and strategic initiatives. Case studies include stock market performance and synergies and the intrinsic value of the firm are compared with offer price. In addition, full data sets for each chapter are available online. Provides an understanding on how to value companies that employ non-standard accounting procedures, particularly companies in emerging markets Gives readers the ability to compare the intrinsic value of the firm with the offer price Showcases a variety of valuation techniques and provides details about handling each part of the valuation process Each case has data in excel spreadsheets for all companies, and data sets for each chapter are available online

Note: Description based upon print version of record. , Front Cover -- Valuation -- Copyright Page -- Dedication -- Contents -- Preface -- Acknowledgments -- I. Theories and Concepts -- 1 Perspectives on value and valuation -- 1.1 Introduction -- 1.2 Application of valuation -- 1.3 Approaches to valuation -- 1.4 Steps in value creation -- 1.5 Value drivers -- 1.6 Empirical evidence on value drivers -- 1.7 Strategic models of valuation -- 1.8 Stock price maximization -- 1.8.1 Shareholder value and wealth creation -- 1.8.2 Value drivers for shareholder wealth creation -- 1.8.3 Measures of shareholder value creation -- 1.8.3.1 Economic value -- 1.8.3.2 Equity spread -- 1.8.3.3 Implied value -- 1.8.3.4 Cash flow return on investment (CFROI) -- 1.8.4 Measures of shareholder wealth creation -- 1.8.5 Hybrid wealth creation measure -- 1.8.5.1 Market value added (MVA) -- 1.9 Linkage between strategic management and shareholder value -- 1.9.1 Value-based management -- 1.9.2 Significance of shared value -- 1.9.3 Intangibles -- 1.9.4 Valuation of intangibles -- 1.9.4.1 Market approach -- 1.9.4.2 Cost approach -- 1.9.4.3 Income method -- 1.9.4.4 Calculated intangible value (CIV) -- 1.9.5 Brand value -- 1.9.6 Brand valuation -- 1.10 Challenges in valuing intangibles -- 1.11 Innovation and value creation -- 1.12 Review of research studies on usage of valuation methods -- 1.13 Challenges for valuation -- 1.14 Review on theories of valuation -- 1.15 Most valuable companies -- Appendix: Financial statement analysis -- Sources and uses of cash -- Cash flow identity -- Measures of cash flow -- Common size statements -- Common base year statements -- Ratio analysis -- Short-term solvency or liquidity measures -- Current ratio -- Quick or acid test ratio -- Absolute liquid or cash ratio -- Profitability measures -- Net profit margin -- Return on assets (ROA) -- Return on capital employed (ROCE) -- Return on equity (ROE). , Long-term solvency measures -- Earnings and cash flow coverage ratios -- Interest coverage ratio -- Cash coverage ratio -- Operational efficiency or asset utilization ratios -- Inventory turnover ratio -- Receivables turnover ratio -- Market value measures -- Du Pont system -- Business risk -- Analysis of growth potential -- Analysis of bank performance -- Profitability measures -- Efficiency measures -- Expense measures -- Leverage ratios -- Asset quality -- Management quality -- Limitations of ratio analysis -- Links for websites for financial analysis -- Fundamentals of valuation -- Time value of money -- Future value and compounding -- Present value and discounting -- Discounted cash flow valuation -- Annuities -- Perpetuities -- Growing annuity -- Continuous compounding -- Different types of interest rates -- Nominal or stated interest rate -- Annual percentage rate -- Periodic rate -- Effective annual rate -- Different types of loans -- Pure discount loans -- Interest only loans -- Amortized loans -- Bond valuation and interest rates -- Basics of bonds -- Features of bond -- Indenture -- Bond terminology -- Par value -- Coupon and coupon rate -- Maturity date -- Yield to maturity (YTM) -- Current yield -- Yield to call -- Premium and discount bond -- Value of bond -- Interest rates -- Term structure of interest rates -- Bond ratings -- Bond pricing theorems -- Duration theorems -- Basics of stock valuation -- Summary highlights of stock valuation -- General method -- Constant growth method -- Nonconstant growth -- Two stage growth -- References -- 2 Risk and return -- 2.1 Introduction -- 2.2 Accounting and risk measures -- 2.3 Measures of returns -- 2.3.1 Total return -- 2.3.2 Historical rates of return -- 2.3.3 Average returns -- 2.3.4 Expected return -- 2.3.5 Portfolio returns -- 2.3.6 Determinants of rate of return -- 2.4 Risk premium. , 2.4.1 Classification of risks -- 2.4.2 Diversification -- 2.4.3 Risk measures -- 2.4.3.1 Variance and standard deviation -- 2.4.3.2 Coefficient of variation -- 2.4.4 Portfolio risk -- 2.4.5 Sharpe ratio -- 2.4.5.1 Beta as a measure of systematic risk -- 2.4.5.2 Beta estimation -- 2.5 Models of risk and return -- 2.5.1 Mean-variance optimization and modern portfolio theory -- 2.5.2 Capital market theory -- 2.5.3 Capital asset pricing model -- 2.5.3.1 Arbitrage -- 2.5.4 Arbitrage pricing theory -- 2.5.5 Multifactor models -- 2.5.6 Fama French three factor model -- 2.5.7 Review of empirical research on models of risk and return -- 2.5.8 Bond ratings -- 2.5.9 Determinants of bond ratings -- References -- 3 Efficient capital markets and its implications -- 3.1 Introduction -- 3.2 Forms of efficient market hypothesis -- 3.2.1 Weak form of efficient market -- 3.2.2 Semi-strong form of efficient market -- 3.2.3 Strong form of efficient market -- 3.3 Tests of EMH -- 3.3.1 Tests for weak form of EMH -- 3.3.2 Tests for semi-strong form of EMH -- 3.3.2.1 Event study -- 3.3.2.1.1 Announcement effects on stock splits -- 3.3.2.1.2 Announcement effects on mergers and acquisitions -- 3.3.2.1.3 Announcement effect on initial public offerings -- 3.3.2.1.4 Announcement effects on economic events -- 3.3.2.1.5 Dividend announcements -- 3.3.2.2 Event study methodology -- 3.3.2.2.1 Market model method -- 3.3.2.2.2 The market-adjusted return method -- 3.3.3 Tests of strong form EMH -- 3.4 Review of research studies on market efficiency -- 3.5 Anomalies of EMH -- 3.6 Implications of EMH -- 3.7 Behavioral finance -- References -- 4 Estimation of cost of capital -- 4.1 Introduction -- 4.1.1 Risk-free rate -- 4.1.2 Risk premium -- 4.1.2.1 Estimation of ERP -- 4.1.2.2 Other perspectives on estimation of market risk premium -- 4.1.2.2.1 Unconditional MRP. , 4.1.2.2.2 Conditional MRP -- 4.1.2.3 Research discussions on ERP -- 4.1.2.4 Variations in risk premium estimations -- 4.1.2.5 Risk premiums in other markets -- 4.1.2.5.1 Estimation of country risk premium from default spread -- 4.1.2.5.2 Country risk premium from volatility of stock prices -- 4.1.2.5.3 Estimation of default spread from bonds -- 4.1.3 Estimation of cost of equity -- 4.1.4 Beta estimation -- 4.1.4.1 Historical beta estimation -- 4.1.4.1.1 Regression beta calculation -- 4.1.4.2 Fundamental beta estimation -- 4.1.4.2.1 Fundamental beta -- 4.1.4.2.2 Determinants of beta -- 4.1.4.2.3 Bottom-up approach for beta estimation -- 4.1.4.2.4 Steps in bottom-up beta estimation -- 4.1.4.3 Accounting betas -- 4.1.5 Cost of equity -- 4.1.6 Cost of capital -- 4.1.6.1 Cost of debt calculation -- 4.1.6.2 Cost of preferred stocks -- 4.1.6.2.1 Estimation of Weighted Average Cost of Capital (WACC) -- 4.1.6.2.2 Estimation of values of capital components -- 4.1.6.2.3 Estimations of components of debt capital -- 4.1.7 Estimation of cost of capital-industry practices -- 4.1.8 Estimation of WACC-Johnson & -- Johnson -- 4.1.8.1 Estimation of cost of capital of Chevron corporation -- References -- 5 Principles of cash flow estimation -- 5.1 Introduction -- 5.2 Adjustments to financial statements -- 5.2.1 Invested capital -- 5.2.2 Debt -- 5.2.3 Equity -- 5.2.4 Return on Invested Capital -- 5.2.5 Free cash flow -- 5.2.6 Operating working capital -- 5.2.7 Net capital expenditure -- 5.2.8 Provisions and reserves -- 5.2.9 Earnings adjustments -- 5.3 Adjustments of expensed investments -- 5.3.1 Adjustment for financing expenses: case of operating leases -- 5.3.2 Adjustment for operating lease: case of IBM in 2013 -- 5.3.3 Summary of adjustments for operating income -- 5.4 Reflections on managed earnings -- 5.4.1 Tax effect on valuation. , 5.5 Estimating reinvestment needs for valuation -- 5.5.1 Net capital expenditures -- 5.5.2 Working capital investments -- 5.5.3 Estimation of net capital expenditure for China National Petroleum Corporation -- 5.6 Forecasting growth -- 5.6.1 Revenue forecast models -- 5.6.2 Forecast of income statement items -- 5.6.3 Forecast of balance sheet items -- 5.6.3.1 Estimation of historical growth rates to forecast future growth -- 5.6.3.2 Analysts estimation of growth rates -- 5.6.3.3 Estimation of growth rate through fundamentals -- 5.6.3.3.1 Estimation of growth rate of EPS: Apple Inc -- 5.6.3.3.2 The growth rate in EPS can also be estimated through fundamentals -- 5.6.3.3.3 Estimation of growth rate of net Income: Apple Inc -- 5.6.3.3.4 Estimation of expected growth rate of net income: Apple Inc -- 5.6.3.3.5 Estimation of growth rate of Indian Oil Corporation -- 5.6.3.3.6 Estimation of growth rate from fundamentals -- 5.6.3.3.7 Estimation of growth rate in net income -- 5.6.3.3.8 Estimation of growth rate in operating income -- References -- 6 Discounted cash flow valuation models -- 6.1 Introduction -- 6.2 Dividend discount model -- 6.2.1 Special cases of DDM -- 6.2.1.1 The constant growth DDM (Gordon growth model) -- 6.2.1.2 Two-stage DDM model -- 6.2.1.3 Financial characteristics of high growth and stable growth firms -- 6.2.1.4 Two-stage H-model -- 6.2.1.5 Three-stage dividend growth model -- 6.2.2 Reflections on terminal value -- 6.2.3 Practical difficulties in estimation of parameters in the DCF models -- 6.2.4 Research studies related to DDM -- 6.2.5 Estimation of value of ICBC through dividend models -- 6.2.5.1 Valuation of ICBC using the stable DDM model -- 6.2.5.2 Estimation of growth rate from fundamentals -- 6.2.5.3 Valuation of ICBC using the two-stage DDM model -- 6.2.6 Valuation of Reliance Industries Ltd using DDM. , 6.2.6.1 Estimation of value of equity. , English

Additional Edition: ISBN 0-12-802303-1

Language: English

UID:

Format: 1 online resource (519 p.)

Edition: 1st edition

ISBN: 0-12-802543-3

Content: Valuation: Theories and Concepts provides an understanding on how to value companies that employ non-standard accounting procedures, particularly companies in emerging markets and those that require a wider variety of options than standard texts provide. The book offers a broader, more holistic perspective that is perfectly suited to companies and worldwide markets. By emphasizing cases on valuation, including mergers and acquisition valuation, it responds to the growing expectation that students and professionals must generate comprehensive perspectives based on thorough investigations and a library of valuation theories. Readers will gain a better understanding of the development of complete analyses, including trend analysis of financial parameters, ratio analysis, and differing perspectives on valuation and strategic initiatives. Case studies include stock market performance and synergies and the intrinsic value of the firm are compared with offer price. In addition, full data sets for each chapter are available online. Provides an understanding on how to value companies that employ non-standard accounting procedures, particularly companies in emerging markets Gives readers the ability to compare the intrinsic value of the firm with the offer price Showcases a variety of valuation techniques and provides details about handling each part of the valuation process Each case has data in excel spreadsheets for all companies, and data sets for each chapter are available online

Note: Description based upon print version of record. , Front Cover -- Valuation -- Copyright Page -- Dedication -- Contents -- Preface -- Acknowledgments -- I. Theories and Concepts -- 1 Perspectives on value and valuation -- 1.1 Introduction -- 1.2 Application of valuation -- 1.3 Approaches to valuation -- 1.4 Steps in value creation -- 1.5 Value drivers -- 1.6 Empirical evidence on value drivers -- 1.7 Strategic models of valuation -- 1.8 Stock price maximization -- 1.8.1 Shareholder value and wealth creation -- 1.8.2 Value drivers for shareholder wealth creation -- 1.8.3 Measures of shareholder value creation -- 1.8.3.1 Economic value -- 1.8.3.2 Equity spread -- 1.8.3.3 Implied value -- 1.8.3.4 Cash flow return on investment (CFROI) -- 1.8.4 Measures of shareholder wealth creation -- 1.8.5 Hybrid wealth creation measure -- 1.8.5.1 Market value added (MVA) -- 1.9 Linkage between strategic management and shareholder value -- 1.9.1 Value-based management -- 1.9.2 Significance of shared value -- 1.9.3 Intangibles -- 1.9.4 Valuation of intangibles -- 1.9.4.1 Market approach -- 1.9.4.2 Cost approach -- 1.9.4.3 Income method -- 1.9.4.4 Calculated intangible value (CIV) -- 1.9.5 Brand value -- 1.9.6 Brand valuation -- 1.10 Challenges in valuing intangibles -- 1.11 Innovation and value creation -- 1.12 Review of research studies on usage of valuation methods -- 1.13 Challenges for valuation -- 1.14 Review on theories of valuation -- 1.15 Most valuable companies -- Appendix: Financial statement analysis -- Sources and uses of cash -- Cash flow identity -- Measures of cash flow -- Common size statements -- Common base year statements -- Ratio analysis -- Short-term solvency or liquidity measures -- Current ratio -- Quick or acid test ratio -- Absolute liquid or cash ratio -- Profitability measures -- Net profit margin -- Return on assets (ROA) -- Return on capital employed (ROCE) -- Return on equity (ROE). , Long-term solvency measures -- Earnings and cash flow coverage ratios -- Interest coverage ratio -- Cash coverage ratio -- Operational efficiency or asset utilization ratios -- Inventory turnover ratio -- Receivables turnover ratio -- Market value measures -- Du Pont system -- Business risk -- Analysis of growth potential -- Analysis of bank performance -- Profitability measures -- Efficiency measures -- Expense measures -- Leverage ratios -- Asset quality -- Management quality -- Limitations of ratio analysis -- Links for websites for financial analysis -- Fundamentals of valuation -- Time value of money -- Future value and compounding -- Present value and discounting -- Discounted cash flow valuation -- Annuities -- Perpetuities -- Growing annuity -- Continuous compounding -- Different types of interest rates -- Nominal or stated interest rate -- Annual percentage rate -- Periodic rate -- Effective annual rate -- Different types of loans -- Pure discount loans -- Interest only loans -- Amortized loans -- Bond valuation and interest rates -- Basics of bonds -- Features of bond -- Indenture -- Bond terminology -- Par value -- Coupon and coupon rate -- Maturity date -- Yield to maturity (YTM) -- Current yield -- Yield to call -- Premium and discount bond -- Value of bond -- Interest rates -- Term structure of interest rates -- Bond ratings -- Bond pricing theorems -- Duration theorems -- Basics of stock valuation -- Summary highlights of stock valuation -- General method -- Constant growth method -- Nonconstant growth -- Two stage growth -- References -- 2 Risk and return -- 2.1 Introduction -- 2.2 Accounting and risk measures -- 2.3 Measures of returns -- 2.3.1 Total return -- 2.3.2 Historical rates of return -- 2.3.3 Average returns -- 2.3.4 Expected return -- 2.3.5 Portfolio returns -- 2.3.6 Determinants of rate of return -- 2.4 Risk premium. , 2.4.1 Classification of risks -- 2.4.2 Diversification -- 2.4.3 Risk measures -- 2.4.3.1 Variance and standard deviation -- 2.4.3.2 Coefficient of variation -- 2.4.4 Portfolio risk -- 2.4.5 Sharpe ratio -- 2.4.5.1 Beta as a measure of systematic risk -- 2.4.5.2 Beta estimation -- 2.5 Models of risk and return -- 2.5.1 Mean-variance optimization and modern portfolio theory -- 2.5.2 Capital market theory -- 2.5.3 Capital asset pricing model -- 2.5.3.1 Arbitrage -- 2.5.4 Arbitrage pricing theory -- 2.5.5 Multifactor models -- 2.5.6 Fama French three factor model -- 2.5.7 Review of empirical research on models of risk and return -- 2.5.8 Bond ratings -- 2.5.9 Determinants of bond ratings -- References -- 3 Efficient capital markets and its implications -- 3.1 Introduction -- 3.2 Forms of efficient market hypothesis -- 3.2.1 Weak form of efficient market -- 3.2.2 Semi-strong form of efficient market -- 3.2.3 Strong form of efficient market -- 3.3 Tests of EMH -- 3.3.1 Tests for weak form of EMH -- 3.3.2 Tests for semi-strong form of EMH -- 3.3.2.1 Event study -- 3.3.2.1.1 Announcement effects on stock splits -- 3.3.2.1.2 Announcement effects on mergers and acquisitions -- 3.3.2.1.3 Announcement effect on initial public offerings -- 3.3.2.1.4 Announcement effects on economic events -- 3.3.2.1.5 Dividend announcements -- 3.3.2.2 Event study methodology -- 3.3.2.2.1 Market model method -- 3.3.2.2.2 The market-adjusted return method -- 3.3.3 Tests of strong form EMH -- 3.4 Review of research studies on market efficiency -- 3.5 Anomalies of EMH -- 3.6 Implications of EMH -- 3.7 Behavioral finance -- References -- 4 Estimation of cost of capital -- 4.1 Introduction -- 4.1.1 Risk-free rate -- 4.1.2 Risk premium -- 4.1.2.1 Estimation of ERP -- 4.1.2.2 Other perspectives on estimation of market risk premium -- 4.1.2.2.1 Unconditional MRP. , 4.1.2.2.2 Conditional MRP -- 4.1.2.3 Research discussions on ERP -- 4.1.2.4 Variations in risk premium estimations -- 4.1.2.5 Risk premiums in other markets -- 4.1.2.5.1 Estimation of country risk premium from default spread -- 4.1.2.5.2 Country risk premium from volatility of stock prices -- 4.1.2.5.3 Estimation of default spread from bonds -- 4.1.3 Estimation of cost of equity -- 4.1.4 Beta estimation -- 4.1.4.1 Historical beta estimation -- 4.1.4.1.1 Regression beta calculation -- 4.1.4.2 Fundamental beta estimation -- 4.1.4.2.1 Fundamental beta -- 4.1.4.2.2 Determinants of beta -- 4.1.4.2.3 Bottom-up approach for beta estimation -- 4.1.4.2.4 Steps in bottom-up beta estimation -- 4.1.4.3 Accounting betas -- 4.1.5 Cost of equity -- 4.1.6 Cost of capital -- 4.1.6.1 Cost of debt calculation -- 4.1.6.2 Cost of preferred stocks -- 4.1.6.2.1 Estimation of Weighted Average Cost of Capital (WACC) -- 4.1.6.2.2 Estimation of values of capital components -- 4.1.6.2.3 Estimations of components of debt capital -- 4.1.7 Estimation of cost of capital-industry practices -- 4.1.8 Estimation of WACC-Johnson & -- Johnson -- 4.1.8.1 Estimation of cost of capital of Chevron corporation -- References -- 5 Principles of cash flow estimation -- 5.1 Introduction -- 5.2 Adjustments to financial statements -- 5.2.1 Invested capital -- 5.2.2 Debt -- 5.2.3 Equity -- 5.2.4 Return on Invested Capital -- 5.2.5 Free cash flow -- 5.2.6 Operating working capital -- 5.2.7 Net capital expenditure -- 5.2.8 Provisions and reserves -- 5.2.9 Earnings adjustments -- 5.3 Adjustments of expensed investments -- 5.3.1 Adjustment for financing expenses: case of operating leases -- 5.3.2 Adjustment for operating lease: case of IBM in 2013 -- 5.3.3 Summary of adjustments for operating income -- 5.4 Reflections on managed earnings -- 5.4.1 Tax effect on valuation. , 5.5 Estimating reinvestment needs for valuation -- 5.5.1 Net capital expenditures -- 5.5.2 Working capital investments -- 5.5.3 Estimation of net capital expenditure for China National Petroleum Corporation -- 5.6 Forecasting growth -- 5.6.1 Revenue forecast models -- 5.6.2 Forecast of income statement items -- 5.6.3 Forecast of balance sheet items -- 5.6.3.1 Estimation of historical growth rates to forecast future growth -- 5.6.3.2 Analysts estimation of growth rates -- 5.6.3.3 Estimation of growth rate through fundamentals -- 5.6.3.3.1 Estimation of growth rate of EPS: Apple Inc -- 5.6.3.3.2 The growth rate in EPS can also be estimated through fundamentals -- 5.6.3.3.3 Estimation of growth rate of net Income: Apple Inc -- 5.6.3.3.4 Estimation of expected growth rate of net income: Apple Inc -- 5.6.3.3.5 Estimation of growth rate of Indian Oil Corporation -- 5.6.3.3.6 Estimation of growth rate from fundamentals -- 5.6.3.3.7 Estimation of growth rate in net income -- 5.6.3.3.8 Estimation of growth rate in operating income -- References -- 6 Discounted cash flow valuation models -- 6.1 Introduction -- 6.2 Dividend discount model -- 6.2.1 Special cases of DDM -- 6.2.1.1 The constant growth DDM (Gordon growth model) -- 6.2.1.2 Two-stage DDM model -- 6.2.1.3 Financial characteristics of high growth and stable growth firms -- 6.2.1.4 Two-stage H-model -- 6.2.1.5 Three-stage dividend growth model -- 6.2.2 Reflections on terminal value -- 6.2.3 Practical difficulties in estimation of parameters in the DCF models -- 6.2.4 Research studies related to DDM -- 6.2.5 Estimation of value of ICBC through dividend models -- 6.2.5.1 Valuation of ICBC using the stable DDM model -- 6.2.5.2 Estimation of growth rate from fundamentals -- 6.2.5.3 Valuation of ICBC using the two-stage DDM model -- 6.2.6 Valuation of Reliance Industries Ltd using DDM. , 6.2.6.1 Estimation of value of equity. , English

Additional Edition: ISBN 0-12-802303-1

Language: English