valuation.Thealternativeistovalueeachoftheequitiesthat
thefirmhas investedin, butthis willbecome increasingly
cumbersomeasthenumberofequityholdingsincreases.In
summary, then, you would add the values of both the
near-cash investments of $23.798 billion and the equity
investmentsof$17.726billiontothevalueoftheoperating
assets of Microsoft.
Asapostscript,itisworthnotingthatMicrosoftdidpayout
thelargestcorporatedividend(ofabout$30billion)inhistory
in2003–2004,leavingthefirmstillwithacashbalanceinthe
tensofbillions.Whilethedividendwaspartlyprecipitatedby
thechangeinthetaxlawsgoverningdividendsin2003,an
argument can be made that it also reflected the market’s
increasingimpatiencewithMicrosoft.Afterall,thecompany
hashad littleto show interms offinancialsuccesses after
Microsoft Windows and Office.
Premiums or Discounts on Marketable Securities?
As a general rule, you should not attach a premium or
discountformarketablesecurities.Thus,youwouldaddthe
entire value of $17,726 millionto the valueof Microsoft.
Thereisan exceptionto thisrule,though, anditrelatesto
firms that make ittheir businessto buy and sell financial
assets.Thesearetheclosed-endmutualfundsofwhichthere
areseveralhundredlistedontheU.S.stockexchanges,and
investmentcompanies,suchasFidelityand T.RowePrice.
Closed-endmutualfundssellsharestoinvestorsandusethe
fundstoinvestinfinancialassets.Thenumberofsharesina
closed-endfundremainsfixedandthesharepricechanges.
Sincetheinvestments ofa closed-endfundare inpublicly
tradedsecurities,thissometimescreatesaphenomenonwhere