wouldreflectthe 50 percentoftheexcessassetsthatthefirm
will be left with after paying the taxes.
Amorepracticalalternativeistoreflecttheoverfundingin
future pension contributions. Presumably, a firm with an
overfundedpension plancanlower its contributions to the
pension plan in future years. These lower pension plan
contributions can generatehigher cash flowsand a higher
firm value.
Joint Venture Investments
Jointventureinvestmentspresentmanyofthesameproblems
that crossholdings do.Depending on thecountry and the
nature of thejoint venture investment,a firm canuse the
equity method, proportional consolidation, or full
consolidation to report on a joint venture investment.
34 In some cases, one of the joint venture partners will
providetheprimarybackingforthedebtinthejointventure.
Finally,thejointventurewillalmostneverbepubliclytraded,
makingitmoreakintoaprivatecompanycrossholdingthan
a publicly traded one. When working with joint venture
investments, analystshaveto beginby examininghowthe
jointventureisaccountedforinthebooks.Ifthejointventure
investments are either proportionallyor fully consolidated,
theoperatingincomeoftheparentcompanyalreadyincludes
the earnings from the joint venture; in the case of full
consolidation, an adjustment has to be made for the
proportionofthejointventurethatdoesnotbelongtothefirm
(akintotheminorityinterestadjustmentwithmajoritycross
holdings).Ifthejointventureinvestmentsareaccountedfor
usingtheequitymethod,theyhavetobetreatedlikeminority
crossholdings.Infirmvaluation,thiswillrequirevaluingthe