SubstitutingtheBlack-Scholesequationforthevalueofan
equivalent call into this equation, we get:
Thus,thereplicatingportfolioforaputiscreatedbyselling
short 1 −N(d 1 )] sharesofstock and investingKe−rt[1 −
N(d 2 )] in the riskless asset.
1 L.Nakamura,“Intangibles:WhatPuttheNewin theNew
Economy?,”FederalReserveBankofPhiladelphiaBusiness
Review(July/August 1999): 3–16.
2 B. Lev, “Remarks on the Measurement, Valuation and
Reporting ofIntangible Assets,”FRBNY EconomicPolicy
Review(September 2003).
3 B. Lev, and P. Zarowin, “The Boundaries of Financial
ReportingandHowtoExtendThem,”JournalofAccounting
Research(Autumn 1999): 353–385.
4 Iamintentionallymakingtheseassumptionsasoptimistic
asIcan.Ihopeyou,asthereader,canmaketheactualcash
flows resemble my estimates.
5 When we use inflation-adjusted values, the value of the
brand name increases from $26.15 billion to almost $40
billion.