|
Archive@NYU >
Stern School of Business >
Finance Working Papers >
Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/26898
|
| Title: | Value Creation and Enhancement: Back to the Future |
| Authors: | Damodaran, Aswath |
| Issue Date: | 1999 |
| Series/Report no.: | FIN-99-018 |
| Abstract: | In recent years, firms have turned to their attention increasingly to
ways in which they can increase their value. A number of competing
measures, each with claims to being the "best" approach to
value creation, have been developed and marketed by investment banking
firms and consulting firms. In this paper, we begin with a generic
discounted cash flow model, and consider the ways in which value can be
created or destroyed in a firm. We then look at two of the most widely
used value enhancement measures, Economic Value Added and Cash Flow
Return on Investment, and consider where these approaches yield similar
results to those obtained from traditional valuation models, and where
(and why) there might be differences. In conclusion, we show that there
is little that is new or unique in these competing measures, and while
they might be simpler than traditional discounted cash flow valuation,
the simplicity comes at a cost that is substantial for high growth firms
with shifting risk profiles. |
| URI: | http://hdl.handle.net/2451/26898 |
| Appears in Collections: | Finance Working Papers
|
All items in Faculty Digital Archive are protected by copyright, with all rights reserved.
|
