This Case is about Finance
Publication Date: 10/28/2005
Tendencies emerging lately, including divestitures, spin offs and class action suits, make an understanding of valuation of businesses with operations that are on-going critical for supervisors, but also for investors and for a firm’s directors. The discounted cash flow approach to valuation that is discussed in this note will be a guide. It will be a guide first to company managers in their own attempt to follow worth optimizing strategies; second, to portfolio managers and security analysts within their effort to find the true economic value of an organization and its equity. Furthermore, it would also be a guide to investment bankers within their advisory function of firms involved in merger transactions and restructuring. This note is not going to show the best way to value firms in financial distress; in such situations, a contingent claims valuation will be suitable. The discounted cash flow valuation technique is illustrated through the valuation of a Canadian business using real financial data.
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