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ISBN: 9780470424650 | 0470424656

Praise for previous editionsThe #1 guide to corporate valuation is back . . . and better than ever!"The best valuation book just got better. This edition's greater emphasis on what drives value and how to measure it will improve the way practitioners conduct financial analysis and, ultimately, make strategic decisions. It is required reading for all executives." -Professor Benjamin C. Esty, Harvard Business School, author of Modern Project Finance: A Casebook"The bible in its field. Anyone wanting to understand what drives corporate value shoul... MOREd read this latest edition." -Dr. Raymund Breu, former chief financial officer, Novartis AG"Valuation gets to the heart of how to measure and manage value in a company. Whether you are evaluating an acquisition, restructuring a corporation, or formulating strategy, this book will help you do it well." -John A. Manzoni, Chief Executive Officer, Talisman Energy Inc."A 'how-to' guide for corporate executives who want to get at the unrealized shareholder values trapped in public companies." -New York Times"The book's clarity and comprehensive coverage make it one of the best practitioners' guides to valuation." -Financial Times

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The number one guide to corporate valuation is back and better than ever.

Thoroughly revised and expanded to reflect business conditions in today's volatile global economy, Valuation, Fifth Edition continues the tradition of its bestselling predecessors by providing up-to-date insights and practical advice on how to create, manage, and measure the value of an organization.

Along with all new case studies that illustrate how valuation techniques and principles are applied in real-world situations, this comprehensive guide has been updated to reflect new developments in corporate finance, changes in accounting rules, and an enhanced global perspective. Valuation, Fifth Edition is filled with expert guidance that managers at all levels, investors, and students can use to enhance their understanding of this important discipline.

-Contains strategies for multi-business valuation and valuation for corporate restructuring, mergers, and acquisitions

-Addresses how you can interpret the results of a valuation in light of a company's competitive situation

-Also available: a book plus CD-ROM package (978-0-470-42469-8) as well as a stand-alone CD-ROM (978-0-470-42457-7) containing an interactive valuation DCF model

Valuation, Fifth Edition stands alone in this field with its reputation of quality and consistency. If you want to hone your valuation skills today and improve them for years to come, look no further than this book.

Praise for previous editions:

The #1 guide to corporate valuation is back . . . and better than ever!

"The best valuation book just got better. This edition's greater emphasis on what drives value and how to measure it will improve the way practitioners conduct financial analysis and, ultimately, make strategic decisions. It is required reading for all executives."-Professor Benjamin C. Esty, Harvard Business School, author of Modern Project Finance: A Casebook

"The bible in its field. Anyone wanting to understand what drives corporate value should read this latest edition."-Dr. Raymund Breu, former chief financial officer, Novartis AG

"Valuation gets to the heart of how to measure and manage value in a company. Whether you are evaluating an acquisition, restructuring a corporation, or formulating strategy, this book will help you do it well."-John A. Manzoni, Chief Executive Officer, Talisman Energy Inc.

"A 'how-to' guide for corporate executives who want to get at the unrealized shareholder values trapped in public companies.''-New York Times

"The book's clarity and comprehensive coverage make it one of the best practitioners' guides to valuation."-Financial Times

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The #1 best-selling guide to corporate valuation for professionals.

About the Authors.

Preface.

Acknowledgments.

Part One Foundations of Value.

1 Why ValueValue?

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 Sh... MOREare.

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.

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.