Damodaran on Valuation_ Security Analysis for Investment and Corporate Finance ( PDFDrive )
to reinvestat thespecified returnoncapital. Growthfrom existingassetscanoccuronlyintheshortterm,sincethereis a limit to how effi ...
equitytofundafirm’s investmentsormismatchingdebtto assetscanresultinahighercostofcapitalandalowerfirm value. 5.Cash,crossholding ...
Ways of Increasing Value Afirmcanincreaseitsvaluebyincreasingcashflowsfrom current operations, by increasing expectedgrowth and ...
general,actionstakentoincreasecash flowsfromassetsin place can be categorized into the following groups: Redeployassets. To the ...
operations (and the ensuing earnings) to lower-tax locales. Risk management can also play a role in reducing taxes by smoothing ...
since the growth effect can be offset by changes elsewhereinthevaluation.Thus,higherreinvestment ratesusuallyresultinhigherexpec ...
As notedearlier,virtuallyeveryfirm,atsomepointin the future,willbecome astable-growthfirm,growingata rate equalto orless thanthe ...
ormoregenerally,increaseitsfirmvaluebychangingboth financing mix and type. 1.Make products/serviceslessdiscretionary.Theoperatin ...
definingtheoptimalfinancingmixistodefineitasthemixat which the cost of capital is minimized. 4.Match financingto assets. Thefund ...
neutral investments (zero net present value investments), earningafairrateofreturn,giventheriskoftheinvestments. Thus,acashbalan ...
Whenfirmsacquirestakesinotherfirms,thevalueofthese holdings willbe added to thevalue ofoperating assetsto arriveatthevalueofthee ...
fundassetscouldendupwithanoverfundedpensionplanand higher equity value. There are ways of creating value from pension fund inves ...
Retracing the steps, it should also be quite clear that the pathway to value enhancement will vary across firms. Suboptimalmanag ...
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ILLUSTRATION13.1:TheValueofChangingManagement: SAP SAP is a business software manufacturing company headquarteredinGermany.Ithas ...
is8.68%.InFigure13.2,wevaluethecompanyassumingthat itwillcontinueitscurrentinvestmentpolicy(maintainingits reinvestmentrateandre ...
Ata30%debtratio,thecostofcapitalisminimizedat7.95%; it is about 0.73% lower than the current cost of capital. Ifweassume thatthe ...
ILLUSTRATION13.2:TheValueofChangingManagement: Blockbuster In April 2005, Carl Icahn shocked the management at Blockbuster, the ...
in2004,ascompetitionhasincreasedbothfromonlinerentals (Netflix) and from discount retailers (Wal-Mart). The companyearnedareturn ...
assumethatthecompanycanraisethereturnoncapitalonits newinvestmentstothecostofcapitalimmediately,thevalue of equityjumps to $2.32 ...
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