Damodaran on Valuation_ Security Analysis for Investment and Corporate Finance ( PDFDrive )
8 UsingthisexpandedversionofROE,thegrowthratecanbe written as: Theadvantageofthisformulationisthatitallowsexplicitly for changes ...
returnonequitymeasuresthequalityofbotholderprojects thathavebeenonthebooksforasubstantialperiodandnew projectsfrom morerecent pe ...
Changeinbookvalueofequityfrom 2003 to 2004 =26,888− 22,913 = $3,975 million Totheextentthatthemarginalreturnonequityrepresentsth ...
productofthereturnonequityinperiodtandtheretention ratio. Whileincreasingreturnonequitywillgenerateaspurtinthe growthrateinthepe ...
After next year, the growth rate will subside to a more sustainable 4.15% (0.12 × 0.3462). How wouldthe answerbe different if th ...
Stable Return on Capital Scenario When a firm has a stable return on capital, its expected growthinoperatingincomeisaproductofth ...
mayyieldabettermeasureofthefuture.Inaddition,asfirms growandmature,theirreinvestmentneeds(andrates)tendto decrease.Forfirmsthath ...
isefficientlyusingitsresources,though, weshould change the reinvestment rate to reflect industry averages. Themoreextremescenar ...
capital is not adjusted to reflect the value of the researchassetorthecapitalvalueofoperatingleases, and by the presence of high ...
Inthisillustration,weestimatethereinvestmentrate,return on capital, and expected growth rate for Titan Cement, a Greek cement co ...
Finally,wecomputetheexpectedgrowthratebymultiplying the after-tax return on capital by the reinvestment rate: If Titan Cement ca ...
WealsocomputedTitanCement’sreturnoncapitaleachyear for the five years (in millions of euros): Withthereturnin 2000 astheoutlier, ...
Forexample,afirmthatseesitsreturnoncapitalimproves from 10 percent to 11 percent while maintaining a reinvestmentrateof 40 perce ...
In2004,Blockbuster,thevideorentalcompany,reportedan after-taxreturnoncapitalof4.06%andareinvestmentrateof 26.46%. If it maintain ...
have to move up the income statement and first estimate growth in revenues. Next, we use the firm’s expected operating marginsin ...
Iftheprojectedrevenuesforafirm 10 yearsoutwouldgiveit a 90 percentor 100 percentshare(orgreater)oftheoverall market in a competi ...
$4.703 billion for the firm in 10 years and a compounded revenue growth rate of 46.98 percent. Theotherapproachistoforecastthee ...
Year Revenue Growth Rate (%)Revenues ($millions) 3 80 2,025 4 60 3,239 5 40 4,535 6 25 5,669 7 20 6,803 8 15 7,823 9 10 8,605 10 ...
firms not only will be worth nothing but are unlikely to survive. For firms to be valuable, the higher revenues eventuallyhaveto ...
counterparts. If they were, you would expect to see a migration of traditional retailers to online retailing and increased compe ...
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