Valuation, Measuring and Managing the Value of Companies – by McK.&Co, T. Koller, M. Goedhart, D. Wessels
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How to Make a Construction-Development Project Profitable?
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According to the M&M theory, the formula for unlevering and levering capital is straightforward, but there are variations of the formula adapted to different situations. Situations can vary based on two parameters: Similarly, the formulas change in the case of levering: Finally, the formulas also change when unlevering or levering beta: The corresponding Excel file…
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It is evident from practice that in cyclical industries (aircraft, iron, paper, chemicals, real estate…) organizations periodically create excess capacity and cycle the industry. When selling prices are attractively high, business inertia takes over. At this time, all competitors are moving at high speed, and even rational executives find it difficult to convince shareholders that…
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The text discusses the challenges and methods involved in valuing financial institutions, particularly banks, compared to corporations. Here’s an English translation: Valuing Banks: It is considered that evaluating financial institutions, including banks, is a more complex task than evaluating corporations. Banks are characterized by high and variable financial leverage. Their published reports do not truly…
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Evaluating organizations operating in developing countries is associated with certain difficulties, and in this area, academics and practitioners often do not agree. The issue is that developing markets are characterized by additional systemic and specific risks. Often, an additional 3%-5% country risk is added to an organization’s WACC, which is a significant mistake. According to…
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When evaluating an organization, one of the important decisions concerns the target leverage, which affects the WACC (Weighted Average Cost of Capital) and consequently the valuation outcome (naturally, the rating also influences the cost of debt). There are typically two main assumptions in this regard: first, that debt increases proportionally with the growth of the…
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The optimal level of financial leverage is determined, on the one hand, by the amount of tax savings an organization receives by deducting interest expenses, and on the other hand, by the magnitude of the probabilistic costs of bankruptcy arising from increased risks. However, one component that I haven’t encountered in academic literature but have…