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Valuation: Measuring and Managing the Value of Companies, University Edition, 5th Edition

ISBN: 978-0-470-88996-1
864 pages
July 2010
Valuation: Measuring and Managing the Value of Companies, University Edition, 5th Edition (0470889969) cover image
McKinsey’s Trusted Guide to Teaching Corporate Valuation is Back and Better than Ever

Designed for classroom use, Valuation, University Edition Fifth Edition is filled with the expert guidance from McKinsey & Company that students and professors have come to trust. Fully Revised and Updated, NEW FEATURES to the Fifth Edition include:

  • ALL NEW CASE STUDIES that illustrate how valuation techniques and principles are applied in real-world situations
  • NEW CONTENT on the strategic advantages of value-based management
  • EXPANDED to include advanced valuation techniques
  • UPDATED to reflect the events of the real estate bubble and its effect on stock markets, new developments in corporate finance, changes in accounting rules, and an enhanced global perspective

Valuation, Fifth Edition remains true to its roots with a solid framework for valuation through key concepts such as:

  • Analyzing historical performance, including reorganizing a company's financial statements to reflect economic rather than accounting performance
  • Forecasting performance, with emphasis on not just the mechanics of forecasting but also how to think about a company's future economics
  • Estimating the cost of capital with practical tips that aren't found in textbooks
  • Interpreting the results of a valuation in light of a company's competitive situation
  • Linking a company's valuation multiples to the core drivers of its performance.

The University Edition contains the same key chapters as Valuation Fifth Edition but expands on them to enhance classroom application with End of Chapter Summaries and Review Questions to help students master key concepts from each chapter before moving on to the next.

For professors, Wiley offers an Online Instructor’s Manual with a full suite of resources exclusive to adopting professors. Contact your rep for more information. 

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About the Authors.

Preface.

Acknowledgments.

Part One Foundations of Value.

1 WhyValueValue?

2 Fundamental Principles of Value Creation.

3 The Expectations Treadmill.

4 Return on Invested Capital.

5 Growth.

Part Two Core Valuation Techniques.

6 Frameworks for Valuation.

7 Reorganizing the Financial Statements.

8 Analyzing Performance and Competitive Position.

9 Forecasting Performance.

10 Estimating Continuing Value.

11 Estimating the Cost of Capital.

12 Moving from Enterprise Value to Value per Share.

13 Calculating and Interpreting Results.

14 Using Multiples to Triangulate Results.

Part Three Intrinsic Value and the Stock Market.

15 Market Value Tracks Return on Invested Capital and Growth.

16 Markets Value Substance, Not Form.

17 Emotions and Mispricing in the Market.

18 Investors and Managers in Efficient Markets.

Part Four Managing for Value.

19 Corporate Portfolio Strategy.

20 Performance Management.

21 Mergers and Acquisitions.

22 Creating Value through Divestitures.

23 Capital Structure.

24 Investor Communications.

Part Five Advanced Valuation Issues.

25 Taxes.

26 Nonoperating Expenses, One-Time Charges, Reserves, and Provisions.

27 Leases, Pensions, and Other Obligations.

28 Capitalized Expenses.

29 Inflation.

30 Foreign Currency.

31 Case Study: Heineken.

Part Six Special Situations.

32 Valuing Flexibility.

33 Valuation in Emerging Markets.

34 Valuing High-Growth Companies.

35 Valuing Cyclical Companies.

36 Valuing Banks.

Appendix A Economic Profit and the Key Value Driver Formula.

Appendix B Discounted Economic Profit Equals Discounted Free Cash Flow.

Appendix C Derivation of Free Cash Flow,Weighted Average Cost of Capital, and Adjusted Present Value.

Appendix D Levering and Unlevering the Cost of Equity.

Appendix E Leverage and the Price-to-Earnings Multiple.

Index.

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McKINSEY & COMPANY is a management consulting firm that helps leading corporations and organizations make distinctive, lasting, and substantial improvements in their performance. Over the past seven decades, the firm's primary objective has remained constant: to serve as an organization's most trusted external advisor on critical issues facing senior management.

TIM KOLLER is a partner in McKinsey's New York office. Tim has served clients in North America and Europe on corporate strategy and issues concerning capital markets, M&A transactions, and value-based management. He leads the firm's research activities in valuation and capital markets issues. He received his MBA from the University of Chicago.

MARC GOEDHART is an associate principal in McKinsey's Amsterdam office. Marc has served clients across Europe on portfolio restructuring, issues concerning capital markets, and M&A transactions. He received a PhD in finance from Erasmus University Rotterdam.

DAVID WESSELS is an adjunct professor of finance and director of executive education at the Wharton School of the University of Pennsylvania. Named by BusinessWeek as one of America's top business school instructors, he teaches corporate valuation at the MBA and Executive MBA levels. David received his PhD from the University of California at Los Angeles.

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  • Updated to reflect recent events, including the credit crisis and global economic recession, and puts into context their effects on company performance and the stock market
  • New case examples that illustrate application of techniques to real-world situations
  • Additional new material on linkage between strategy and value creation
  • New chapters on advanced valuation topics
  • More detailed analysis and data on return on capital and growth
  • Updated to reflect changes in accounting rules
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