
Valuation
Theories and Concepts
Resources
Description
Key Features
- 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
Readership
Finance professionals and students in upper-division undergraduate and graduate level courses worldwide on valuation
Table of Contents
- Part I: Theories and Concepts
- 1. Perspectives on value and valuation
- Abstract
- 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
- 1.9 Linkage between strategic management and shareholder value
- 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
- Analysis of growth potential
- Fundamentals of valuation
- Bond valuation and interest rates
- Basics of stock valuation
- Summary highlights of stock valuation
- References
- 2. Risk and return
- Abstract
- 2.1 Introduction
- 2.2 Accounting and risk measures
- 2.3 Measures of returns
- 2.4 Risk premium
- 2.5 Models of risk and return
- References
- 3. Efficient capital markets and its implications
- Abstract
- 3.1 Introduction
- 3.2 Forms of efficient market hypothesis
- 3.3 Tests of 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
- Abstract
- 4.1 Introduction
- References
- 5. Principles of cash flow estimation
- Abstract
- 5.1 Introduction
- 5.2 Adjustments to financial statements
- 5.3 Adjustments of expensed investments
- 5.4 Reflections on managed earnings
- 5.5 Estimating reinvestment needs for valuation
- 5.6 Forecasting growth
- References
- 6. Discounted cash flow valuation models
- Abstract
- 6.1 Introduction
- 6.2 Dividend discount model
- 6.3 FCF valuation models
- 6.4 Adjusted present value method
- 6.5 Value of nonoperating assets
- 6.6 Estimation of total 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
- 6.10 Estimation of value of Sasol through the two-stage FCFF model
- References
- 7. Relative valuation
- Abstract
- 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
- 7.6 Industry-specific multiples
- 7.7 Research studies on relative valuation
- 7.8 Principles of relative valuation
- 7.9 Cases of relative valuation
- References
- 8. Mergers and acquisition valuation
- Abstract
- 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
- 8.7 Valuation of M&A synergies
- 8.8 Payment to target firms
- 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
- References
- 9. Real options valuation
- Abstract
- 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
- 9.5 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
- Abstract
- 10.1 Valuation of internet companies
- 10.2 Valuation of financial institutions
- 10.3 Valuation of biotechnology companies
- 10.4 Valuation of real estate and construction sectors
- 10.5 Valuation of oil companies
- References
- 11. Valuation issues
- Abstract
- 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
- 1. Perspectives on value and valuation
- Part II: Case Studies on Valuation
- 12. Valuation of Walmart
- Abstract
- 12.1 Financial highlights
- 12.2 Equity value creation
- 12.3 Ratio analysis
- 12.4 Standardized income statements of Walmart
- 12.5 Valuation of Walmart
- 12.6 Discounted cash flow valuation
- 12.7 Two stage FCFE model
- 12.8 Relative valuation
- References
- 13. Valuation of Tata Motors
- Abstract
- 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
- 13.10 FCFE valuation
- 13.11 Stable stage or constant growth model
- 13.12 Valuation using FCFF model
- 13.13 Relative valuation (Tables 13.16–13.18)
- References
- 14. Valuation of Samsung Electronics
- Abstract
- 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
- 14.8 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
- 14.13 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
- 14.17 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)
- Abstract
- 15.1 Business segments
- 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
- 15.6 DDM
- 15.7 Relative valuation (Tables 15.18–15.26)
- References
- 16. Valuation of Gazprom
- Abstract
- 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
- 16.5 WACC estimation
- 16.6 Valuation using discounted cash flow valuation
- 16.7 FCFE valuation
- 16.8 Relative valuation
- References
- 17. Valuation of Singapore airlines
- Abstract
- 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
- Abstract
- 18.1 Current financial highlights
- 18.2 Financial highlights
- 18.3 Growth analysis (Tables 18.4 and 18.5)
- 18.4 Stock wealth creation
- 18.5 Dividend discount model
- 18.6 Estimation of growth rate from fundamentals (Table 18.11)
- 18.7 Relative valuation (Tables 18.13–18.15)
- References
- 19. Valuation of China life insurance
- Abstract
- 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
- 19.9 Relative valuation
- References
- 20. Valuation of Franklin resources
- Abstract
- 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
- 20.7 Stable phase inputs
- 20.8 Relative valuation
- References
- 21. Valuation of Pfizer
- Abstract
- 21.1 Growth perspective of Pfizer
- 21.2 Performance analysis
- 21.3 Stock wealth creation
- 21.4 Estimation of cost of equity and WACC
- 21.5 Valuation models
- 21.6 Relative valuation
- Reference
- 12. Valuation of Walmart
- Part III: Case Studies on Mergers and Acquisition Valuation
- 22. Google’s acquisition of Motorola—a valuation perspective
- Abstract
- 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
- 22.6 Returns analysis for different time windows of acquisition announcement
- 22.7 Cumulative abnormal return analysis
- 22.8 Valuation—operating performance analysis
- 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
- 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
- Abstract
- 23.1 Industry overview
- 23.2 Company highlights
- 23.3 Merger highlights
- 23.4 Expected synergies
- 23.5 Impact of merger announcement on wealth creation
- Reference
- 24. Tata’s acquisition of Corus—a valuation analysis
- Abstract
- 24.1 Highlights of Corus
- 24.2 Highlights of Tata Steel
- 24.3 The bidding war
- 24.4 Market reaction during the acquisition process
- 24.5 Strategic reasons for the acquisition
- 24.6 Valuation perspective
- References
- 22. Google’s acquisition of Motorola—a valuation perspective
- Glossary
- Part I: Theories and Concepts
Product details
- No. of pages: 514
- Language: English
- Copyright: © Academic Press 2015
- Published: November 5, 2015
- Imprint: Academic Press
- Hardcover ISBN: 9780128023037
- eBook ISBN: 9780128025437
About the Author
Rajesh Kumar

He has published three books with Elsevier/Academic Press including the recently published Strategic Financial Management Casebook that strategically uses integrative case studies-cases that do not emphasize specific subjects such as capital budgeting or value based management-to provide a framework for understanding strategic financial management. His earlier book, Strategies of Banks and Other Financial Institutions, presents a comprehensive portrait of financial institutions worldwide by balancing their theories of strategy and risk structure with detailed case studies. His book on Valuation Theories and Concepts, offer a broader more holistic perspective on valuation suited to companies and markets worldwide.