Howdoyoureflectthevalueofsuchassetsinfirmvalue?An
inventory of allsuch assets (or atleast the most valuable
ones)isafirststep,followedupbyestimatesofmarketvalue
foreach oftheassets.Theseestimatescanbe obtained by
lookingatwhattheassetswouldfetchinthemarkettodayor
byprojectingthecashflowsthatcouldbe generatedif the
assetsweredevelopedanddiscountingthecashflowsatthe
appropriate discount rate.
Theproblem with incorporatingunutilized assets intofirm
value is an informational one. Firms do not reveal their
unutilizedassetsaspartoftheirfinancialstatements.Whileit
maysometimesbepossibletofindoutaboutsuchassetsas
investorsoranalysts,itisfarmorelikely thattheywillbe
uncoveredonlywhenyouhaveaccesstoinformationabout
what the firm owns and uses.
Pension Fund Assets
Firmswithdefinedpensionliabilitiessometimesaccumulate
pensionfundassetsin excessoftheseliabilities.Whilethe
excessdoesbelongtostockholders,theyusuallyfaceatax
liabilityiftheyclaimit.Theconservativeruleindealingwith
overfundedpensionplanswouldbetoassumethatthesocial
andtaxcostsofreclaimingtheexcessfundsaresolargethat
fewfirmswouldeverevenattempttodoso.Analternative
approachwouldbetoaddtheafter-taxportionoftheexcess
fundsintothevaluation.Asan illustration,considera firm
thatreportspensionfundassetsthatexceeditsliabilitiesby
$1billion.Sinceafirmthatwithdrawsexcessassetsfroma
pensionfundistaxedat 50 percentonthesewithdrawals(in
the United States), you would add $500 million to the
estimated value of the operating assets of the firm. This