Damodaran on Valuation_ Security Analysis for Investment and Corporate Finance ( PDFDrive )
Thesecondreasonforholdingcashistocoverunanticipated expensesortomeetunspecifiedcontingencies.Forexample, cyclicalfirmswillaccumu ...
Future Capital Investments If capital markets were efficient and always accessiblewithnotransactionscosts,firmscouldraisefresh c ...
companies.Cashbalancesshouldalsodecreasewith anincreaseinthefinancialchoicesthatfirmshaveto raisecapital.Thus,thecapacityto acce ...
cash during economic crises to buy assets from distressed firms at bargain prices. The advantage to holding cash becomesmuchsmal ...
13 Thereisalsoevidencethatfirmsthataccumulatecashtendto report subpar operating performance, at least on average. 14 Extent of C ...
3.Cashasapercentofafirm’srevenues.Thismeasuresthe linkage(ifoneexists)betweencashholdingsandoperations. Figure10.3providesthedis ...
FIGURE 10.3Cash as a Percent of Revenues ...
WhileFigures10.1through10.3provideusefulinformation aboutthedifferencesacrossallfirms,itisstillinstructiveto lookunderneathatdif ...
neededforoperationsisnoteasy,thoughtherearethreeways in which this estimation is made: 1.Ruleofthumb.Fordecades,analystshaveused ...
Wasting versus Nonwasting CashInourview,thedebateabouthowmuchcashisneeded foroperationsandhowmuchisexcesscashmissesthepoint when ...
thebookinterestrateearnedoncashwillbelowerthanthe marketinterestrate.Considerasimpleexample.CyberTech Inc.hadanaveragecashbalanc ...
There aretwo ways in which we can deal with cash and marketablesecuritiesindiscountedcashflowvaluation.One istolumptheminwiththe ...
wouldneedtoadjustthebetaaccordingly.Whilethiscanbe donesimplyifyouusebottom-upbetas,youcanseethatit wouldbemuchmoredifficulttodo ...
valueofthecashandmarketablesecuritiestoittoarriveat firm value. CanthisbedonewiththeFCFEvaluationmodelsdescribed in theearlierch ...
Including cashin the picture (whichwe almost always do withreturnonequityandsometimeswithreturnoncapital) just muddies the water ...
The equity is worth $1,400 million. Now,letustrytovaluethemseparately,beginningwiththe noncash investments. To this, wecan add t ...
Ifwediscountthecashat10%,wewouldvaluethecashat $90 million instead of the correct value of $200 million—hence the loss in value ...
andcasharethesame.Inthegrossdebtapproach,we addthecashbalancebacktotheoperatingassetsand thensubtractthegrossdebt.Inthenetdebtap ...
FIGURE 10.4 Gross Debt versus Net Debt Approaches—Implicit Assumptions ($ millions) ILLUSTRATION10.2:ValuingaLeveredFirmwithCash ...
Net Debt Valuation ...
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