proportionalownershipinthejointventureandaddingitto
thevalueoftheoperatingassets.Inequityvaluation,thenet
incomewillincludetheproportionalshareofthejointventure
earnings and there is no need to value the joint venture
separately.
CONCLUSION
Investments in cash, marketable securities, and other
businesses(crossholdings)areoftenviewedasafterthoughts
invaluation.Analystsspendlittletimeassessingtheimpactof
theseassetsonvaluebuttheydosoattheirownrisk.Inthis
chapter,wefirstconsideredthemagnitudeofinvestmentsin
cashatfirmsandthemotivationsforaccumulatingthiscash.
Wefollowedupbylookingathowbesttoassessthevalueof
cashinbothdiscountedcashflowandrelativevaluation.Cash
isrisklessand generallyearns lowratesofreturn,andthis
makesitdifferentfrom theoperatingassetsofa firm.The
safestwaytodealwithcashistoseparateitfromoperating
assetsandtovalueitindependentlyinbothdiscountedcash
flow and relative valuation. We also considered how to
incorporate the values of financial investments, cross
holdings, and other nonoperating assets into firm value.
APPENDIX 10.1: INDUSTRY AVERAGES: CASH
RATIOS—JANUARY 2005