Aswath Damodaran 406
Regression Results
! Regressing changes in firm value against changes in the dollar over this
period yields the following regression –
Change in Firm Value = 0. 2060 - 2. 04 (Change in Dollar)
( 3. 40 ) ( 2. 52 )
- Conclusion: Disney’s value is sensitive to exchange rate changes, decreasing as the
dollar strengthens.
! Regressing changes in operating cash flow against changes in the dollar over
this period yields the following regression –
Change in Operating Income = 0. 1768 - 1. 76 ( Change in Dollar)
( 2. 42 ) ( 1. 81 )
Conclusion: Disney’s operating income is also impacted by the dollar. A stronger
dollar seems to hurt operating income.
The negative effect of the stronger dollar on operating income might reflect the
revenues that Disney gets from tourists at its theme parks. These tourists are
less likely to visit the theme parks when the dollar is stronger.
The effect is muted on firm value. It is possible that a stronger dollar has an
offsetting effect on discount rates (A stronger dollar might translate into lower
interest rates)
