Valuation, with CD-ROM: Measuring and Managing the Value of Companies (Wiley Finance) (Hardcover)

by McKinsey & Company Inc. (Author), Tim Koller (Author), Marc Goedhart (Author), David Wessels (Author) "Chief executives from North America to Europe and Asia may be forgiven if they appear perplexed as they try to figure out how to lead..." (more)
Key Phrases: unlevered cost, divestitures create value, other nonoperating assets, Home Depot, United States, Historical Forecast (more...)

Editorial Reviews

Product Description
VALUATION, Fourth Edition with CD-ROM

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, 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 Refining and Marketing, BP plc

Praise for the First Edition

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

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

From the Inside Flap
At the crossroads of corporate strategy and finance lies valuation. And in today's economy— whether you're a seasoned manager or a budding business professional—it's essential to excel at measuring, managing, and maximizing shareholder and company value. Valuation,with its companion CD-ROM, will show you how to do just that and much more.

Hailed by financial professionals worldwide as the single best guide of its kind, Valuation, Fourth Edition with CD-ROM combines the dynamic flexibility of Excel spreadsheets with the depth and breadth of a classic text. Thoroughly revised and expanded to reflect business conditions in today's volatile global economy, Valuation, Fourth Edition with CD-ROM 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 the events of the Internet bubble and its effect on stock markets, new developments in academic finance, changes in accounting rules (both U. S. and IFRS), and an enhanced global perspective.

Valuation, Fourth Edition with CD-ROM is filled with expert guidance as well as a valuation model developed by McKinsey's own finance practice. With the companion CD-ROM as your guide, you can even conduct your own valuation analysis of companies.

This package contains a solid framework that managers at all levels, investors, and students have come to trust. With it, you'll receive an executive education on:

• Analyzing historical performance, including reorgan-izing a company's financial statements to reflect economic rather than accounting performance
• Forecasting performance, with emphasis on not just the mechanics of forecasting but also how to think about a company's future economics
• Estimating the cost of capital with practical tips that aren't found in textbooks
• Interpreting the results of a valuation in light of a company's competitive situation
• Linking a company's valuation multiples to the core drivers of its performance

Valuation, Fourth Edition with CD-ROM remains true to its roots with an extensive discussion on the complexity of measuring corporate performance to assess historical financial results properly and to gain insight into a company's ability to create value in the future (its corporate "health"). A complementary chapter advises managers how to run companies to create long-term value, and a new chapter explores ways to improve communication with financial markets.

Valuation, Fourth Edition with CD-ROM stands alone in this field with its reputation of quality and consistency. The author team of Tim Koller, Marc Goedhart, and David Wessels has taken the latest insights from their experiences working with global companies and created one of the most engaging and insightful guides to valuation. If you want to hone your valuation skills today and improve them for years to come, look no further than the Fourth Edition of Valuation with CD-ROM.

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. With consultants deployed from over eighty offices in more than forty countries, McKinsey advises companies on strategic, operational, organizational, financial, and technological issues. The firm has extensive experience in all major industry sectors and primary functional areas, as well as in-depth expertise in high-priority areas for today's business leaders.

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Product Details

• Hardcover: 768 pages
• Publisher: Wiley; 4 edition (June 14, 2005)
• Language: English
• ISBN-10: 0471702196
• ISBN-13: 978-0471702191
• Product Dimensions: 10.1 x 7.1 x 1.9 inches
• Shipping Weight: 3.4 pounds (View shipping rates and policies)
• Average Customer Review: 4.1 out of 5 stars See all reviews (24 customer reviews)
• Amazon.com Sales Rank: #664,642 in Books (See Bestsellers in Books)

Customer Reviews

Most Helpful Customer Reviews

97 of 99 people found the following review helpful:

4.0 out of 5 stars This is a review of only the CD - i.e., Excel model, March 27, 2006

By	guy on the west coast - See all my reviews

This review is from: Valuation: Measuring and Managing the Value of Companies (Wiley Finance) (CD-ROM)

Let me say that I like the McKinsey model and use it a lot to value certain companies. Overall, I found that the Results section of the model really helped me understand the detailed nuances of the McKinsey model, especially given that the book itself is sometimes vague.

I gave the CD product 4 stars, instead of 5 stars, because I felt that:

1) The PDF instructional manual on using the model is woefully inadequate.
2) There were a few serious errors in the model.
3) The model took the easy way out on a lot of difficult valuation items.

1. The PDF manual is woefully inadequate. Reading it, you think the model is self-explanatory, but it really isn't. You have to really study the numbers to understand what assumptions the model wants you to make. In this regard, the book is marginally helpful, the examples in the book is slightly more helpful. In many cases, I had to turn to other valuation texts to figure out a few things.

2. The model is for the most part, error-free. But I did catch two calculation errors that I will share, so that others can avoid the pain. First, in the Forecast Drivers tab, there is a data row called Capex. It looks back at the optional Capital Expenditure line as an off-balance sheet item in 'Historical Data.' This is inconsistent with the book's data driven approach and specification that CapEx = change in Net PPE + Depreciation. You may want to recorrect the Capex formula to specify this. Why the model asks us to manually specify the Capital Expenditures in Historical Data, I have no idea.

Another error I saw is in the Results tab. In the Ratios section, there is one called 'Enterprise value / EBITA'. If you look at the formula, it points to EBIT. You need to correct this by having it point to Reported EBITA.

3. I think the model takes the easy way out on a lot of the most difficult items. For example, the book advocates treatment of R&D as a capitalized asset, and yet the model excludes this entirely. The book advocates dealing with the market value of debt, but the model just incorporates the book value of debt. The model leaves as an entry item the value of the lease as a balance sheet item, when it you could easily just as well incorporate extensions to model this. This is the same for options, convertible debt, customer receivables, unutilized/discontinued assets, etc.

Basically, the book is aggressive in advocating a firm estimation of operational value, NOA value, and Debt/DE claims, but the model is much less ambitious.

This does not make the model useless. It's a great data-driven model. It just requires the user to build sophisticated extensions to deal with the most complicated parts. At the same time, this is no cheap model. They are probably making lots of money on it. I would have expected the folks at McKinsey to provide extensions to handle the most complicated aspects of valuation, in addition to the core items.

16 of 19 people found the following review helpful:

5.0 out of 5 stars Valuation (McKinsey - 4th Edition), October 25, 2005

By	Jon Bull (Boston, MA USA) - See all my reviews

This review is from: Valuation: Measuring and Managing the Value of Companies, Fourth Edition, University Edition (Paperback)

This book is awesome. It offers incredibly comprehensive and insightful methods for rearranging financial statements into key drivers of firm value. It also teaches you how to apply those drivers to create a forecast for the future. Individual chapters are dedicated to the more complex concepts. This is a great resource for an aspiring or practicing analyst.

3 of 3 people found the following review helpful:

5.0 out of 5 stars The Bible of Valuation, February 8, 2008

By	Andre Rafnsson (Sweden) - See all my reviews (REAL NAME)

This review is from: Valuation: Measuring and Managing the Value of Companies, Fourth Edition (Hardcover)

This is it.....do not need additional book info on Valuations. Only practical experience can add to the respective work.

I work in the M&A field and use the books goodies every day.

Best Regards
André Rafnsson