Equity Valuation, Risk, and Investment: A Practitioner's Roadmap

Contents

Foreword

Preface

About the Author

Chapter 1: Introduction

Theoretical Precision or Theoretical Resilience?

Practical Difficulties as Well

Overview of Our Analysis

A Quick and Important Note on Mathematical Notation

Chapter 2: Inflation-Protected Bonds as a Valuation Template

Formulas behind the Intuition

TIPS versus Traditional Fixed-Rate Bonds: Measuring the Differences

A Peek Ahead

Chapter 3: Valuing Uncertain, Perpetual Income Streams

Mathematical Development of Unleveraged Firm Valuation

What Does the Valuation Formula Tell Us about Sensitivity to Inflation?

Sensitivity to Real Discount Rates and Growth Factors

Comparison with a Traditional Model of Firm Valuation

Chapter 4: Valuing a Leveraged Equity Security

Leverage in the Presence of Corporate Income Taxes

From Theory to Practice

Chapter 4 Supplement: Relationship between Leveraged Equity Discount Rate and Debt-to-Capital Ratio for Highly Leveraged Companies

Chapter 5: Case Studies in Valuation During the Recent Decade

Case 1: Coca-Cola

Case 2: Intel

Case 3: Procter&Gamble

Market-Implied, Inflation-Adjusted Discount Rates for Coca-Cola, Intel, and Procter&Gamble

Case 4: Enron

Tying Up the Package: Practical Lessons from All Four Cases

Chapter 6: Treatment of Mergers and Acquisitions

Generalizing from the P&G/Gillette Example

Applicability of the Results under Alternate Merger Terms

Analytical Postscript 1: Common Stock Buybacks and Issuances Outside the Merger Framework

Analytical Postscript 2: A Word on Executive ...