protectionsforstockholders,thelowerthecashholdings at
companies.
13 R. Zhang, “The Effects of Firm- and Country-Level
GovernanceMechanismsonDividendPolicy,CashHoldings
and Firm Value: ACross Country Study,” working paper,
SSRN,2005.Thispaperfindsthatcashholdingsarehigherat
companies where ownership is concentrated.
14 W. H. Mikkelson and M. Partch, “Do Persistent Large
Cash Reserves Hinder Performance?,”Journal of Financial
and Quantitative Analysis38 (2003): 257–294.
15 Theupdatedversionsoftheseratioswillbeaccessibleon
my web site (www.damodaran.com) under “Updated Data.”
16 Thus,ifcashrepresents 10 percentofthefirmvalue,the
unleveredbetausedwillbeaweightedaverageofthebetaof
the operating assets and the beta of cash (which is zero).
17 Theunleveredbetathatyoucanbackoutofaregression
betareflectstheaveragecashbalance(asapercentoffirm
value) over the period of the regression. Thus, if a firm
maintainsthisratioataconstantlevel,youmightbeableto
arrive at the correct unlevered beta.
18 Growthratein netincome =Returnonequity× Equity
reinvestmentrate(orretentionratio);growthrateinoperating
income = Return on capital × Reinvestment rate. The
reinvestmentrateisthesumofreinvestment(netcapexand
changeinworkingcapital)dividedbytheafter-taxoperating
income.