Valuation

Theories and Concepts
 
 
Academic Press
  • 1. Auflage
  • |
  • erschienen am 5. November 2015
  • |
  • 514 Seiten
 
E-Book | ePUB mit Adobe DRM | Systemvoraussetzungen
E-Book | PDF mit Adobe DRM | Systemvoraussetzungen
978-0-12-802543-7 (ISBN)
 

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


Dr. B. Rajesh Kumar is a Professor at the Institute of Management Technology FZ-LLC in Dubai, UAE. He earned his PhD in Management from the Indian Institute of Technology , IIT Kharagpur. He has published over 25 empirical research papers in refereed international journals and is the author of four books. His co-authored research works have been cited in the popular financial press, such as The Financial Times, Money Week and The Economist.
  • Englisch
  • New York
  • |
  • USA
Elsevier Science
  • 5,06 MB
978-0-12-802543-7 (9780128025437)
0128025433 (0128025433)
weitere Ausgaben werden ermittelt
  • 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
  • 6.2.6.2 Valuation of RIL using the two-stage DDM
  • 6.2.6.3 Estimation of growth rate from fundamentals
  • 6.2.6.4 Inputs for stable growth estimates
  • 6.3 FCF valuation models
  • 6.3.1 FCFE
  • 6.3.1.1 FCFE valuation models
  • 6.3.1.2 The constant growth or single-stage FCFE model
  • 6.3.1.3 Two-stage FCFE model
  • 6.3.1.4 Three-stage FCFE model
  • 6.3.2 FCFF
  • 6.3.2.1 FCFF models
  • 6.3.2.1.1 Single-stage FCFF model
  • 6.3.2.1.2 Two-stage FCFF model
  • 6.3.2.1.3 Three-stage FCFF model
  • 6.3.2.1.4 Adjustments for estimation of FCFF
  • 6.3.2.1.5 Determination of FCFF from EBITDA
  • 6.3.2.1.6 Determination of FCFF from cash flow from operations
  • 6.3.2.1.7 Determination of FCFF on uses of FCF Basis
  • 6.3.2.1.8 Forecasting FCFE and FCFF
  • 6.3.2.1.9 Advantages and disadvantages of DCF method
  • 6.3.2.1.10 Zero growth valuation model
  • 6.4 Adjusted present value method
  • 6.4.1 Steps in APV estimation
  • 6.5 Value of nonoperating assets
  • 6.6 Estimation of total value of firm
  • 6.6.1 Estimation of equity value of firm
  • 6.7 Theoretical perspectives on free cash flow valuation
  • 6.8 Research studies on FCF models
  • 6.9 Estimation of value of Hyundai Motors through FCFE and FCFF valuation models
  • 6.9.1 Valuation of Hyundai Motors through FCFE model
  • 6.9.2 Inputs for valuation models
  • 6.9.3 Estimation of FCFE in the stable phase period
  • 6.9.4 Cost of equity calculation
  • 6.9.5 Zero growth valuation model
  • 6.9.6 Constant growth rate model (stable growth model)
  • 6.9.7 Two-stage FCFE model
  • 6.9.8 Valuation inputs from fundamentals
  • 6.9.9 FCFF valuation of Hyundai
  • 6.9.10 One-stage or constant growth FCFF model
  • 6.9.11 Cost of debt calculation
  • 6.10 Estimation of value of Sasol through the two-stage FCFF model
  • 6.10.1 Inputs for estimation of FCFF in the high growth period
  • 6.10.2 Estimation of cost of capital
  • 6.10.3 Cost of debt calculation
  • 6.10.4 Stable growth rate inputs
  • References
  • 7 Relative valuation
  • 7.1 Introduction
  • 7.2 Advantages and disadvantages of relative valuation
  • 7.3 Drivers of relative valuation
  • 7.4 Steps in relative valuation
  • 7.5 Relative valuation techniques
  • 7.5.1 Forward multiples
  • 7.5.1.1 Equity price-based multiples
  • 7.5.1.1.1 Earnings multiplier-P/E ratio
  • 7.5.1.1.2 Price earning growth ratio
  • 7.5.1.1.3 P/B ratio
  • 7.5.1.1.4 Price-to-cash flow (P/CF) ratio
  • 7.5.1.1.5 P/S ratio
  • 7.5.1.1.6 Dividend yield
  • 7.5.1.2 EV-based multiples
  • 7.5.1.2.1 EV/EBITDA
  • 7.5.1.2.2 EV/EBIT
  • 7.5.1.2.3 EV/Sales
  • 7.5.1.2.4 EV/EBITDAR
  • 7.5.1.2.5 EV/Invested capital
  • 7.5.1.2.6 EV/capacity measure
  • 7.5.1.2.7 Value-to-book ratio
  • 7.5.1.2.8 Tobin q ratio
  • 7.6 Industry-specific multiples
  • 7.7 Research studies on relative valuation
  • 7.8 Principles of relative valuation
  • 7.9 Cases of relative valuation
  • 7.9.1 Relative valuation of America Movil
  • 7.9.1.1 EVs for America Movil
  • 7.9.2 Relative valuation of TSMC
  • 7.9.2.1 Enterprise valuation
  • 7.9.3 Relative valuation of Sberbank
  • 7.9.3.1 EV multiples for Sberbank
  • References
  • 8 Mergers and acquisition valuation
  • 8.1 Introduction
  • 8.2 Types of mergers and acquisitions
  • 8.3 Synergies in mergers
  • 8.4 Drivers of value creation in different types of M&A
  • 8.5 Empirical evidence on value creation in M&A
  • 8.6 M&A valuation
  • 8.6.1 Enterprise value
  • 8.6.2 Book value of assets
  • 8.6.3 Liquidation value
  • 8.6.4 Replacement cost valuation
  • 8.6.5 Discounted cash flow valuation
  • 8.6.6 Adjusted present value method
  • 8.6.7 Relative valuation
  • 8.6.8 Venture capital valuation approach
  • 8.6.9 Real options valuation approach
  • 8.6.10 Firm valuation using weighted average method
  • 8.7 Valuation of M&A synergies
  • 8.7.1 Estimation of value of synergy
  • 8.8 Payment to target firms
  • 8.8.1 Types of exchange of shares
  • 8.9 Bootstrapping
  • 8.10 Empirical studies involving methods of payment
  • 8.11 Empirical studies on performance of merged companies
  • 8.12 Principles of evaluation of bids
  • 8.13 Illustration of financial variables in merger analysis
  • 8.13.1 Case 1
  • 8.13.2 Case 2
  • References
  • 9 Real options valuation
  • 9.1 Introduction
  • 9.2 Real options as strategic investments
  • 9.3 Limitations of discounted cash flow methods
  • 9.4 Different types of real options
  • 9.4.1 The option to delay
  • 9.4.2 Option to expand
  • 9.4.3 Abandonment option
  • 9.5 Solution approach to option valuation
  • 9.6 Real options in different industry sectors
  • 9.7 Factors affecting the value of real growth options
  • 9.8 Real options in mergers and acquisitions
  • 9.9 Empirical studies on real options
  • 9.10 Real option valuation using decision tree approach
  • 9.11 Real option valuation using Black Scholes model
  • References
  • 10 Valuation of different industry sectors
  • 10.1 Valuation of internet companies
  • 10.1.1 Analysis of valuation methods
  • 10.2 Valuation of financial institutions
  • 10.2.1 Bank's performance evaluation
  • 10.2.1.1 CAMEL rating system
  • 10.2.1.2 Capital adequacy
  • 10.2.1.3 Asset quality
  • 10.2.1.4 Management quality
  • 10.2.1.5 Earning ability
  • 10.2.1.6 Liquidity
  • 10.2.2 Valuation of insurance companies
  • 10.2.2.1 Valuation models in insurance
  • 10.2.3 Investment banks
  • 10.2.4 Mutual funds
  • 10.2.5 Pension funds
  • 10.3 Valuation of biotechnology companies
  • 10.4 Valuation of real estate and construction sectors
  • 10.4.1 Real estate valuation methods
  • 10.5 Valuation of oil companies
  • References
  • 11 Valuation issues
  • 11.1 Valuation of closely held or private companies
  • 11.2 Valuing firms with negative earnings
  • 11.3 Valuing cyclical firms
  • 11.4 Valuing startup firms
  • 11.5 Valuing multibusiness firms
  • 11.6 Valuation in emerging markets
  • 11.7 Valuing high growth companies
  • 11.8 Errors in valuation
  • References
  • II. Case Studies on Valuation
  • 12 Valuation of Walmart
  • 12.1 Financial highlights
  • 12.2 Equity value creation
  • 12.2.1 Analysis of wealth creation
  • 12.3 Ratio analysis
  • 12.4 Standardized income statements of Walmart
  • 12.5 Valuation of Walmart
  • 12.6 Discounted cash flow valuation
  • 12.6.1 Dividend discount model (DDM)-stable stage growth model
  • 12.6.2 Two stage growth DDM model
  • 12.6.2.1 Estimation of historical growth rate
  • 12.6.2.1.1 Estimation of growth rate from fundamentals
  • 12.6.2.2 Estimation of inputs for stable phase
  • 12.6.3 Valuation using Free Cash Flow to Equity (FCFE) model
  • 12.6.3.1 Estimation of growth rates from historical rates and fundamentals
  • 12.7 Two stage FCFE model
  • 12.7.1 One stage FCFE model
  • 12.7.2 Zero growth FCFE model
  • 12.7.3 Valuation using FCFF model
  • 12.7.4 Two stage FCFF model
  • 12.7.5 One stage FCFF model
  • 12.7.6 Zero growth model
  • 12.8 Relative valuation
  • References
  • 13 Valuation of Tata Motors
  • 13.1 Global industry trends
  • 13.2 Business overview
  • 13.3 Competitor analysis
  • 13.4 Financial performance analysis
  • 13.5 Wealth creation in stock market
  • 13.6 Ratio analysis
  • 13.7 Estimation of cost of equity and WACC
  • 13.8 Valuation of Tata Motors
  • 13.9 Valuation using dividend discount models
  • 13.9.1 Two stage DDM valuation
  • 13.9.1.1 Estimation of growth rate from fundamentals
  • 13.9.1.2 Estimation inputs for high growth period (Table 13.14)
  • 13.9.1.3 Inputs for stable phase growth period
  • 13.9.1.4 According to the two stage DDM model
  • 13.9.2 One stage or constant growth DDM model
  • 13.10 FCFE valuation
  • 13.10.1 General formula for FCFE calculation
  • 13.10.2 Estimation of growth rate from fundamentals
  • 13.11 Stable stage or constant growth model
  • 13.12 Valuation using FCFF model
  • 13.12.1 Constant growth FCFF model
  • 13.13 Relative valuation (Tables 13.16-13.18)
  • References
  • 14 Valuation of Samsung Electronics
  • 14.1 Strategies for growth
  • 14.2 Growth trend analysis
  • 14.3 Ratio analysis (Tables 14.6-14.12)
  • 14.4 Stock market wealth creation (Tables 14.13 and 14.14)
  • 14.5 Discounted cash flow valuation
  • 14.6 Estimation of cost of equity and cost of capital
  • 14.7 Dividend discount model
  • 14.7.1 Inputs for stable phase growth period
  • 14.8 Constant growth DDM
  • 14.9 FCFE valuation
  • 14.10 Estimation of adjusted net capital expenditure (Table 14.19)
  • 14.11 Estimation of noncash working capital in millions of krw
  • 14.12 Estimation of two stage FCFE valuation
  • 14.12.1 Inputs
  • 14.12.2 Stable phase inputs
  • 14.13 Constant growth FCFE model
  • 14.14 Zero growth FCFE model
  • 14.15 FCFF valuation model (Tables 14.24 and 14.25)
  • 14.16 Two stage FCFF valuation model
  • 14.16.1 High growth inputs
  • 14.17 Stable phase inputs
  • 14.18 FCFF one stage growth model
  • 14.19 FCFF zero growth model
  • 14.20 Relative valuation
  • 15 Valuation of Industrial and Commercial Bank of China (ICBC)
  • 15.1 Business segments
  • 15.1.1 Personal banking
  • 15.1.2 Corporate banking
  • 15.1.3 E-banking
  • 15.1.4 International banking
  • 15.2 Strategy
  • 15.3 Growth analysis (Tables 15.2-15.13)
  • 15.4 Stock market wealth creation (Tables 15.14-15.16)
  • 15.5 Valuation of ICBC
  • 15.5.1 Estimation of cost of equity
  • 15.5.2 Estimation of historical growth rates
  • 15.5.3 Estimation of growth rates from fundamentals
  • 15.6 DDM
  • 15.6.1 Stable phase inputs
  • 15.7 Relative valuation (Tables 15.18-15.26)
  • References
  • 16 Valuation of Gazprom
  • 16.1 Growth rate analysis (Table 16.4)
  • 16.2 Ratio analysis (Tables 16.5-16.9)
  • 16.3 Stock wealth creation (Tables 16.10 and 16.11)
  • 16.4 Estimation of cost of capital
  • 16.4.1 Estimation of cost of debt
  • 16.5 WACC estimation
  • 16.6 Valuation using discounted cash flow valuation
  • 16.6.1 DDM
  • 16.6.1.1 Estimation of growth rates
  • 16.6.1.2 Estimation of growth rates from fundamentals (Table 16.12)
  • 16.6.1.3 Stable period inputs
  • 16.7 FCFE valuation
  • 16.7.1 Estimation of historical reinvestment rate
  • 16.7.2 Estimation of growth rate from fundamentals
  • 16.7.3 Estimation of FCFE (Table 16.18)
  • 16.7.4 FCFE two stage model
  • 16.7.4.1 High growth period inputs
  • 16.7.4.2 Stable period inputs
  • 16.7.4.3 One stage or stable state FCFE model
  • 16.8 Relative valuation
  • References
  • 17 Valuation of Singapore airlines
  • 17.1 Growth rate analysis (Tables 17.10-17.12)
  • 17.2 Ratio analysis (Tables 17.13-17.16)
  • 17.3 Stock wealth creation
  • 17.4 Excess value added (Table 17.18)
  • 17.5 Estimation of cost of capital
  • 17.6 Valuation models
  • 17.7 Stable stage dividend discount model
  • 17.8 Stable stage FCFE and FCFF models
  • 17.9 Estimation of FCFE in year 2014
  • 17.10 Estimation of FCFF
  • 17.11 Relative valuation (Tables 17.19 and 17.20)
  • 17.12 Enterprise value multiples
  • Reference
  • 18 Wells Fargo
  • 18.1 Current financial highlights
  • 18.2 Financial highlights
  • 18.3 Growth analysis (Tables 18.4 and 18.5)
  • 18.4 Stock wealth creation
  • 18.4.1 Cost of equity estimation
  • 18.5 Dividend discount model
  • 18.6 Estimation of growth rate from fundamentals (Table 18.11)
  • 18.6.1 High growth rate inputs (Table 18.12)
  • 18.6.2 Stable phase inputs
  • 18.7 Relative valuation (Tables 18.13-18.15)
  • References
  • 19 Valuation of China life insurance
  • 19.1 Financial highlights
  • 19.2 Solvency ratio
  • 19.3 Gross written premium
  • 19.4 Analysis of cash flows
  • 19.5 Estimation of embedded value
  • 19.6 Stock return analysis
  • 19.7 Estimation of cost of equity
  • 19.8 Discounted cash flow model
  • 19.8.1 Estimation of growth rate from fundamentals
  • 19.8.2 Stable stage inputs
  • 19.9 Relative valuation
  • References
  • 20 Valuation of Franklin resources
  • 20.1 Types of SIPs
  • 20.2 Types of investment management and related services
  • 20.3 Investment products
  • 20.4 Stock wealth creation
  • 20.5 Estimation of cost of equity
  • 20.6 Valuation
  • 20.6.1 Two stage DDM
  • 20.7 Stable phase inputs
  • 20.8 Relative valuation
  • References
  • 21 Valuation of Pfizer
  • 21.1 Growth perspective of Pfizer
  • 21.2 Performance analysis
  • 21.3 Stock wealth creation
  • 21.4 Estimation of cost of equity and WACC
  • 21.4.1 Cost of debt
  • 21.4.2 Market value weights
  • 21.5 Valuation models
  • 21.5.1 Dividend discount model (Tables 21.7 and 21.8)
  • 21.5.2 Two-stage DDM
  • 5.2.1 Stable period inputs
  • 21.5.3 One-stage DDM
  • 21.5.4 Estimation of value using FCFE model
  • 21.5.5 Calculation of adjusted ROE
  • 21.5.6 Two-stage FCFE model
  • 5.6.2 First-stage period inputs
  • 5.6.3 Stable period inputs
  • 21.5.7 Constant growth FCFE model
  • 21.5.8 FCFF valuation model
  • 5.8.4 Two-stage FCFF model
  • 5.8.5 Stable period inputs
  • 21.5.9 Constant growth FCFF model
  • 21.6 Relative valuation
  • Reference
  • III. Case Studies on Mergers and Acquisition Valuation
  • 22 Google's acquisition of Motorola-a valuation perspective*
  • 22.1 Introduction
  • 22.2 Merger highlights
  • 22.3 Strategic reasons for the acquisition
  • 22.4 Financial breakdown of Motorola deal
  • 22.5 Valuation perspectives
  • 22.5.1 Acquisition and stock wealth creation
  • 22.6 Returns analysis for different time windows of acquisition announcement
  • 22.7 Cumulative abnormal return analysis
  • 22.8 Valuation-operating performance analysis
  • 22.8.1 Revenue highlights of Google Inc.
  • 22.9 Two-stage valuation model for Motorola Mobility (Figure 22.10, Table 22.5)
  • 22.10 Zero growth or perpetuity model valuation for Motorola
  • 22.11 Relative valuation for Google Inc.
  • 22.12 Cash flow to market value model
  • 22.12.1 Google FCFF after acquiring Motorola (Table 22.9)
  • 22.12.2 MMI valuation at purchase price versus prior to deal (Table 22.10)
  • 22.12.3 Accretion/dilution analysis (Table 22.11)
  • 22.12.4 Google sell off of Motorola to Lenovo
  • 22.12.5 Sensitivity analysis
  • Appendix 1: Cumulative returns for Google Inc.
  • Appendix 2: Cumulative returns for Motorola Mobility Holdings
  • Appendix 3: Cumulative abnormal returns (CAR) for Google Inc.
  • Appendix 4: Cumulative abnormal returns (CAR) for Motorola Mobility Holdings
  • References
  • 23 HP Compaq merger-valuation
  • 23.1 Industry overview
  • 23.2 Company highlights
  • 23.2.1 Acquirer company: HP
  • 23.2.2 Target company: Compaq
  • 23.2.3 Performance statistics
  • 23.3 Merger highlights
  • 23.4 Expected synergies
  • 23.5 Impact of merger announcement on wealth creation
  • 23.5.1 Operating performance analysis
  • Reference
  • 24 Tata's acquisition of Corus-a valuation analysis
  • 24.1 Highlights of Corus
  • 24.2 Highlights of Tata Steel
  • 24.3 The bidding war
  • 24.3.1 Timeline of the deal
  • 24.4 Market reaction during the acquisition process
  • 24.5 Strategic reasons for the acquisition
  • 24.5.1 Funding highlights
  • 24.6 Valuation perspective
  • 24.6.1 Valuation of Corus
  • 24.6.2 Estimation of value of Corus using FCFF model
  • 24.6.2.1 Cost of equity estimation
  • 24.6.2.2 Input for first stage
  • 24.6.2.3 Stable phase inputs
  • 24.6.3 Valuation summary
  • References
  • Glossary
  • Index
  • Back Cover

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