2. Fundemental Princple of Valuation and Value Vreation.docx - Fall 2020 Notes#2 L Levitin FBE 421 Fundamental Principles of Value and Value Creation A

2. Fundemental Princple of Valuation and Value...

This preview shows page 1 - 3 out of 11 pages.

Fall 2020 L. Levitin Notes #2 FBE 421 Fundamental Principles of Value and Value Creation A.12 CONCEPTS THAT FORM THE FOUNDATION OF VALUATION1. The intrinsic value of the firm’s business operations is determined by discountingthe firm’s future free cash flow by the firm’s weighted average cost of capital. 2.Companies create value by investing capital at rates of return that exceed their cost of capital 1
b.The logic of this concept is shown belowCan Management Earn More by Investing ThanShareholder Can?Is Value Created? c. The potential value creation for a firm is a function of:

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture