Damodaran on Valuation_ Security Analysis for Investment and Corporate Finance ( PDFDrive )
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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 ...
Nintendo, the Japanese manufacturer of video games, presented an interesting picture at the start of 2005. The companyreported 4 ...
be partially attributable to the market’s skepticism about whetherNintendocanmaintaintheexcess returnsitmakes nowforever(whichis ...
valuationshowsitat 718 billionbut 518 billionwill be paid out as dividends.) Withthesechanges,thevalueofequitypershareincreasest ...
ofcontrolwillalsobelow.Inthissection,wefirstconsider themechanismsforchangingmanagement,andthensomeof the factors that determine ...
abletopresentproposalsto stockholderstochangepolicies that they feel are inimical to shareholder interests. Often, these proposa ...
managers for the proxies of individual investors, with the intentofgettingtheirnomineesfortheboardelected.They maynotalwayssucce ...
fail,theonlyweaponthatstockholdershaveleftistohope thatthefirmwillbecomethetargetofahostileacquisition, wheretheacquirerwilltake ...
Capital Constraints Youneed to raise capitalto acquire firms that arepoorly managed, and any constraints on that process can imp ...
fund an acquisition but is unlikely to come up with $20 billion.Thus,itshouldcomeasnosurprisethatthemanagers oflargerfirmsinclos ...
Inertia and Conflicts of Interest Thereisonefinalfactortoconsiderinwhethermanagersin badlymanagedfirmsfeeltheheatfromstockholder ...
actions taken by thesefirms. This protectioncan take the form of antitakeover amendments to thecorporate charter, elaboratecross ...
takeover and,hence,their marketprices.Theneteffect on valuewillvaryacrossfirms, however;firmswiththemost inefficientmanagementar ...
Voting Rights Thetime-honoredwayforprotectingincumbentmanagement is to issue shares with different voting rights. In its most ex ...
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