FI.Chapter15 - 1-iCorponat* Valuatiom,...

Download Document
Showing pages : 1 - 3 of 45
This preview has blurred sections. Sign up to view the full version! View Full Document
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: 1-iCorponat* Valuatiom, Value-EasedMaraagemremtu amd eorporateuoveg"maE?eeTl r,..r \.rd inra.tpd $.0rl,r in th, \\:lI Cumpo-rlp IndF\ l0 V.dr, .r':,'. \.,urIrnvp.lmen. rvou d h"r c gros r to S2.2q4t..ullin8 'n nr 8.t- .,rrru.,l r.rte oI returnHid y.r pui rhP sl 000 rn Berl-hrnHathah'ay, you would nor\, havc $2,960,rvhich is an 11.5% annual rcturn. And if youhad been really smart (or lucky) and invested rr Dell. \ou sL'uld llow have gi17r'.\rf i.l' r,nr,lJ (. i,rlo i hhoppinB 2L.u .annual reiurnl Berkshir Hathaway andDcll compete in very diffcrent jndustries,nJ urrli,,F diffrrrn -l..rleF,ie.. )et borlrLdv" b.,,r(,' rl-, m.,.ke, b\ "hdrint dn,.p, rrrirB pl- lu.,.ph\ lhe) hr\..rcrt,J \.,lLLfor shareholders by foftsing on the Ireecash flows of their undcrlyinB busjnesses.Whn this focus is applied systematically.Irorg\nJt r.umpJ.r\ rt r...rlled v.rl ,based manailement, $'hich is thc .cntralth{rlne of this chapier.Berkshire Hatha$'ay's p mary stratetyh;ls been to gro| through acquisitions.hhffn Buffett, Berkshire's CEO, lvrote in nrecent letter to shareholders that hc seeks io\\1 'bu'rre-.e- ll-,rl Sencr.rl( ( rndcorsistenilv earn above-average returns onlh'.r..'pir.rl. Wh.n ' vrlu"lrrg J potentr,rl,1(.tui.iri,'n. BuffLlr n,v- he (omprrF. rl.purchasc price {,ith its "intrinsic value,whj. h ',f Jerl|rer .r. lhe dr-counred \aluy,.f rh, cr-h th,,r cdI be lalen out oi a bu,i-n.'ss during its remaining Iife-" Thus.Buffett's Brou'th strategy is Sovemed by theprinciples of value-based management.Instcad of gror'\'ing primarily throughacquisitions, Dell has chosen to grow "or8an-ic.lly" by expanding its existing businessesand developing ncw products and markets.Fnr mr^l ,,'nrprni... rdprd 8row,h n .al,*r,\|rrri- r.rpr.i erowlh ir opernlirg (dpil.rl.whrch r,J,r'F. Iee.r,h fl('(. BL,l Dell i5rcle1rtless in minimizing the amount of operJtirE (.rt.ilr'e,tuirLd tu,upporl "ale.. Tr.t.r.!. JL rints thc l.r-L i ).rr.. Dpll h". hdd oul.r.l|trlirt i,frf.,nn.rn. p in rhe d rivFr , ol \ alu(-basd management: (1) Iis sales have grownf.r.lrr lh.rr ll',\ . ve'.rge, /2) rr- prolilnargin has cxcccdcd the inctustry ai.erage,and (3) its capital requnemenis have remainedLowr than the industry average.Kccp Berkshife Hatha\^'ay's and DeU'sf,,.,,. ,'t) , .r.h flor,- ir m ind .i\ ) uu .e.,d tl,r" Voriom anildl,epo : olBe*shne Horhowoy li. oid DelCompde6518Chopier 15e le50LlfceTh r.xlbookh Web sirecontoins on Excel file lhorrhe chopErt col.ulolions.The file for lhh choprd i3F 12 Ch 15 Tool Kt.xh,ond w ncouroge youto op6n the file ond fol.Corporore Voluollon, Vdlu+Bosed Monosemeni, ond Coporote GovornonceAs we have emphasized throughout the book, maximizint shareholder valueshould be managemenfs primary objective. However, to maximize value, man-agrs need a tool for estimating the effects of altemative strategies....
View Full Document