Step Output
Add the value of any assets
whoseearningsarenotpartof
operating income
+ Cash and marketable
securities
+ Value of minority
holdings in other
companies
+ Value of idle or
unutilized assets
Subtract nonequity claims on
the company
- Valueofinterest-bearing
debt - Presentvalueofoperating
lease commitments - Estimated value of
minority interests in
consolidated companies - Unfunded healthcare or
pension obligations - Expected litigation
payouts
To get to value of equity = Value of equity
ILLUSTRATION 6.2: Valuing Titan Cement—March 2005
Titan Cement is a Greek cement company with a
well-establishedreputationforefficiencyandprofitability.To
valuethecompany,weusedafirmvaluationmodelandthe
following assumptions:
In2004,thefirmreported231.8millioneurosinoperating
income and aneffective taxrate of25.47%. Scaledto the
book value of capital at the end of 2003, this yields an
after-tax return on capital of 19.25%.