Valuation : The Art and Science of Corporate Investment Decisions

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  • Edition: 1st
  • Format: Hardcover
  • Copyright: 2008-01-01
  • Publisher: Addison Wesley
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Valuation: The Art and Science of Making Corporate Investment Decisionsis the first textbook to offer an integrated approach to both project and enterprise valuation. The text goes beyond standard DCF analysis by including additional valuation methods commonly used in practice, such as comparables, simulations, and real options. Overview of Evaluation.Project Analysis Using Discounted Cash Flow (DCF):Forecasting and Valuing Cash Flows; Project Risk Analysis.Cost of Capital:Estimating a Firmrs"s Cost of Capital; Estimating Required Rates of Return for Projects.Enterprise Valuation:Relative Valuation Using Market Comparables; Enterprise Valuation; Valuation in a Private Equity Setting; Earnings Dilution, Incentive Compensation, and Project Selection.Futures, Options, and the Valuation of Real Investments:Using Futures and Contractual Options to Value Real Investments; Managerial Flexibility and Project Valuation: Real Options; Strategic Options: Evaluating Strategic Opportunities.For all readers interested in project and enterprise valuation.

Table of Contents

Overview of Valuation
The Nature of Major
Investment Decisions Dealing with Complexity
Process and Discipline Case Study CP3 Corporation, Inc. Summing Up and Looking
Project Analysis Using Discounted Cash Flow (DCF)
Forecasting and Valuing
Cash Flows Discounted
Cash Flows and Valuation Defining Investment
Cash Flows Comprehensive Example Forecasting Project Free
Cash Flows Valuing Investment
Cash Flows Summary Problems
Project Risk Analysis
Uncertainty and Investment
Analysis Sensitivity
Analysis Learning More about the Project Decision
Trees Valuing Project Flexibility
Summary Problems
Appendix: An Introduction to Simulation Analysis and Crystal Ball
Cost of Capital
Estimating a Firm's Cost of Capital
Introduction Value, Cash Flows, and Discount Rates Estimating the WACC
Appendix: Extensions and Refinements of the WACC Estimate
Estimating Required Rates of Return for Projects
The Pros and Cons of Multiple Risk-Adjusted Costs of Capital Choosing a Project Discount Rate Hurdle Rates and the Cost of Capital Summary Problems
Enterprise Valuation
Relative Valuation Using Market Comparables
Valuation Using Comparables Enterprise
Valuation Using EBITDA Multiples Equity
Valuation Using the Price-Earnings Multiple Pricing an Initial Public Offering Other Practical Considerations
Summary Problems
Enterprise Valuation
Using a Two-Step Approach to Estimate Enterprise Value
Using the APV Model to Estimate Enterprise Value Summary Problems
Valuation in a Private Equity Setting
Overview of the Market for Private Equity Valuing
Investments in Start-ups and Deal Structuring Valuing
LBO Investments
Summary Problems
Earnings Dilution, Incentive Compensation, and Project Selection
Project Analysis Earnings per Share and Project Selection Economic
Profit and the Disconnect between EPS and NPV Practical Solutions
Using Economic Profit Effectively
Summary Problems
Futures, Options, and the Valuation of Real Investments
Using Futures and Contractual Options to Value Real Investments
The Certainty-Equivalence Method Using Forward Prices to Value
Investment Projects Using Option Prices to Value
Investment Opportunities Caveats and Limitations Tracking Errors
Summary Problems
Option Basics A Quick Review
Multi-Period Probability Trees and Lattices
Calibrating the Binomial Option Pricing Model
Managerial Flexibility and Project Valuation: Real Options
Introduction Types of Real Options Valuing
Investments That Contain Embedded Real Options
Analyzing Real Options as American-Style Options
Using Simulation to Value Switching Options
Mistakes Made in Real Option Valuation
Summary Problems
Appendix: Constructing Binomial Lattices
Strategic Options: Evaluating Strategic Opportunities
Where Do Positive-NPV Investments Come From?
Valuing a Strategy with Staged Investments Strategic Value
When the Future Is Not Well Defined Summary Problems
Epilogue Glossary
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