About the Authors ix
Preface xi
Acknowledgments xv
Part One Foundations of Value
1 Why Value Value? 3
2 Finance in a Nutshell 17
3 Fundamental Principles of Value Creation 27
4 Risk and the Cost of Capital 55
5 The Alchemy of Stock Market Performance 69
6 Valuation of ESG and Digital Initiatives 83
7 The Stock Market Is Smarter Than You Think 99
8 Return on Invested Capital 127
9 Growth 155
Part Two Core Valuation Techniques
10 Frameworks for Valuation 177
11 Reorganizing the Financial Statements 205
12 Analyzing Performance 239
13 Forecasting Performance 259
14 Estimating Continuing Value 285
15 Estimating the Cost of Capital 305
16 Moving from Enterprise Value to Value per Share 335
17 Analyzing the Results 357
18 Using Multiples 367
19 Valuation by Parts 391
Part Three Advanced Valuation Techniques
20 Taxes 413
21 Nonoperating Items, Provisions, and Reserves 427
22 Leases 443
23 Retirement Obligations 457
24 Measuring Performance in Capital-Light Businesses 467
25 Alternative Ways to Measure Return on Capital 483
26 Inflation 493
27 Cross-Border Valuation 507
Part Four Managing for Value
28 Corporate Portfolio Strategy 527
29 Strategic Management: Analytics 547
30 Strategic Management: Mindsets and Behaviors 571
31 Mergers and Acquisitions 585
32 Divestitures 613
33 Capital Structure, Dividends, and Share Repurchases 633
34 Investor Communications 667
Part Five Special Situations
35 Emerging Markets 691
36 High-Growth Companies 709
37 Cyclical Companies 725
38 Banks 733
39 Flexibility 759
Appendix A Discounted Economic Profit Equals Discounted Free Cash Flow 793
Appendix B Derivation of Free Cash Flow, Weighted Average Cost of Capital, and Adjusted Present Value 799
Appendix C Levering and Unlevering the Cost of Equity 805
Appendix D Leverage and the Price-to-Earnings Multiple 813
Appendix E Other Capital Structure Issues 817
Appendix F Technical Issues in Estimating the Market Risk Premium 823
Appendix G Global, International, and Local CAPM 827
Appendix H A Valuation of Costco Wholesale 835
Appendix I Two-Stage Formula for Continuing Value 859
Index 861
