外文翻译
原文
Investment Valuation Tools and Techniques for Determining the Value
of any Asset
Material Source:www.docin              Author:Damodaran In much of this book, we have taken on the role of a passive investor valuing going concerns. In this chapter, we switch roles and look at valuation from the perspective of those who can make a difference in the way a company is run and hence its value. Our focus is therefore on how actions taken by managers and owners can change the value of a firm.
We will use the discounted cash flow framework that we have developed in earlier parts of the book to explore the requirements for an action to be value creating and then go on to examine the different ways in which a firm can create value. In the process, we will also examine the role that marketing decisions, production decisions, and strategic decisions have in value creation.
Value Creating and Value Neutral Actions
The value of a firm is the present value of the expected cash flows from both assets in place and future growth, discounted at the cost of capital. For an action to create value, it has to do one or more of the following.
1. increase the cash flows generated by existing investments
2. increase the expected growth rate in earnings
deductible
3. increase the length of the high growth period
4. reduce the cost of capital that is applied to discount the cash flows
Conversely, an action that does not affect cash flows, the expected growth rate, the length of the high growth period or the cost of capital cannot affect value.
While this might seem obvious, a number of value-neutral actions taken by firms receive disproportionate attention from both managers and analysts. Consider four examples.
Stock dividends and stock splits change the number of units of equity in a firm but do not affect cash flows, growth or value. These actions can have price effects,
though, because they alter investors’ perceptions of the future of the company. Accounting changes in inventory valuation and depreciation methods that are restricted to the reporting statements and do not affect tax calculations have no effect on cash flows, growth or value. In recent years, firms have spent an increasing amount of time on the management and smoothing of earnings and seem to believe that there is a value payoff in doing this.
When making acquisitions, firms often try to structure the deals in such a way that they can pool their assets and not show the market premium paid in the acquisition. When they fail and they are forced to show the difference between market value and book value as goodwill, their earnings are reduced by the amortization of the goodwill over subsequent periods. This amortization is not tax deductible, however, and thus does not affect the cash flows of the firm. So, whether a firm adopts purchase or pooling accounting and the length of time it takes to write off the goodwill should not really make any difference to value.
In the late 1990s, a number of firms that have issued tracking stock on their high-growth divisions. Since these divisions remain under the complete control of the parent company, we would argue that the issue of tracking stock, by itself, should not create value.
Some would take issue with some of these propositions. When a stock splits or a firm issues tracking stock, they would argue, the stock price often goes up significantly.
While this is true, we would emphasize that it is value, not price, that we claim is unaffected by these actions.
While paying stock dividends, splitting stock and issuing tracking stock are value neutral actions, they can still be useful tools for a firm that perceives itself to be undervalued by the market. These actions can change market perceptions about growth or cash flows and thus act as signals to financial markets. Alternatively, they might provide more information about undervalued assets owned by the firm and the price may react as a consequence. In some cases, these actions may even lead to changes in operations; tying the compensation of managers to the price of stock tracking the division in which they work may improve efficiency and thus increase cash flows, growth and value.
Ways of Increasing Value
The value of a firm can be increased by increasing cash flows from assets in place, increasing expected growth and the length of the growth period and by
reducing the cost of capital. In reality, however, none of these is easily accomplished or likely to reflect all the qualitative factors that we, as financial analysts, are often accused of ignoring in valuation. In this section, we will consider how actions taken by a firm on a variety of fronts – marketing, strategic and financial – can have an effect on value.
Increase Cash Flows from Existing Investments
The first place to look for value is in the firm’s existing assets. These a ssets represent investments the firm has already made and they generate the current operating income for the firm. To the extent that these investments earn less than their cost of capital or are earning less than they could if optimally managed, there is potential for value creation.
Poor Investments: Keep, Divest or Liquidate
Every firm has some investments that earn less than necessary to break even (the cost of capital) and sometimes even lose money. At first sight, it would seem to be a simple argument to make those investments that do not earn their cost of capital should either be liquidated or divested. If, in fact, the firm could get back the original capital on liquidation, this statement would be true. But that assumption is not generally true and there are three different measures of value for an existing investment that we
need to consider.
The first is the continuing valu e and it reflects the present value of the expected cash flows from continuing the investment through the end of its life. The second is the liquidation or salvage value, which is the net cash flow that the firm will receive if it terminated the project today. Finally, there is the divestiture value, which is the price that will be paid by the highest bidder for this investment.
Whether a firm should continue with an existing project, liquidate the project, or sell it to someone else will depend upon which of the three is highest. If the continuing value is the highest, the firm should continue with the project to the end of the project life, even though it might be earning less than the cost of capital. If the liquidation or divestiture value is higher than the continuing value, there is potential for an increase in value from liquidation or divestiture. The value increment can then be summarized.
If liquidation is optimal: Expected Value Increase = Liquidation Value –Continuing Value
If divestiture is optimal: Expected Value Increase = Divestiture Value - Continuing Value
How does a divestiture affect a firm’s value? To answer, w e compare the price received on the divestit
ure to the present value of the expected cash flows that the firm would have received from the divested assets. There are three possible scenarios.
1. If the divestiture value is equal to the present value of the expected cash flows, the divestitures will have no effect on the divesting firm’s value.
2. If the divestiture value is greater than the present value of the expected cash flows, the value of the divesting firm will increase on the divestiture.
3. If the divestiture value is less than the present value of the expected cash flows, the value of the firm will decrease on the divestiture.
The divesting firm receives cash in return for the assets and can choose to retain the cash and invest it in marketable securities, invest the cash in other assets or new investments, or return the cash to stockholders in the form of dividends or stock buybacks. This action, in turn, can have a secondary effect on value.
The risk that we have discussed hitherto in this chapter relates to cash flows on investments being different from expected cash flows. There are some investments, however, in which the cash flows are
promised when the investment is made. This is the case, for instance, when you lend to a business or buy a corporate bond; the borr- ower may default on interest and principal payments on the borrowing. Generally speaking, borrowers with higher default risk should pay higher interest rates on their borrowing than those with lower default risk. This section examines the measure- ment of default risk and the relationship of default risk to interest rates on borrow- ing.
In contrast to the general risk and return models for equity, which evaluate the effects of market risk on expected returns, models of default risk measure the cones- quences of firm-specific default risk on promised returns? While diversification can be used to explain why firm-specific risk will not be priced into expected returns for equities, the same rationale cannot be applied to securities that have limited upside potential and much greater downside potential from firm-specific events. To see what we mean by limited upside potential, consider investing in the bond issued by a company. The coupons are fixed at the time of the issue and these coupons represent the promised cash flow on the bond. The best case scenario for you as an investor is that you receive the promised cash flows; you are not entitled to more than these cash flows even if the company is wildly successful. All other scenarios contain only bad news, though in varying degrees, with the delivered cash flows being less than
the promised cash flows. Consequently, the expected return on a corporate bond is likely to reflect the
firm specific default risk of the firm issuing the bond.
On investments with equity risk, the risk is best measured by looking at the variance of actual returns around the expected returns, with greater variance indicating greater risk. This risk can be broken down into risk that affects one or a few investments, which we call firm specific risk, and risk that affects many investments, which we refer to as market risk. When investors diversify, they can reduce their exposure to firm specific risk. By assuming that the investors who trade at the margin are well diversified, we conclude that the risk we should be looking at with equity investments is the market risk. The different models of equity risk introduced in this chapter share this objective of measuring market risk, but they differ in the way they do it. In the capital asset pricing model, exposure to market risk is measured by a market beta, which estimates how much risk an individual investment will add to a portfolio that includes all traded assets. The arbitrage pricing model and the multi-factor model allow for multiple sources of market risk and estimate betas for an investment relative to each source. Regression or proxy models for risk look for firm characteristics, such as size, that have been correlated with high returns in the past and use these to measure market risk. In all these models, the risk measures are used to estimate the expected return on an equity investment. This expected return can be considered the cost of equity for a company.
译文
贴现现金流估值框架
资料来源：豆丁网作者：达姆达兰在这本书的大部分，我们采取的是作为一种被动角的投资者去关注评估。在这一章中，我们交换角，从可以让一个公司在不同的经营方式下运行来看待企业价值。因此，我们的重点是管理人员和所有者是如何采取措施来改变一个公司的价值。
我们将使用贴现现金流量框架，这是我们所创造的一个模型，目的是为了适应价值创造探索的需求，然后再探讨使企业能够创造价值的各种不同的方法。在这个过程中，我们也会研究营销决策、生产决策和战略决策在价值创造中起到的作用。