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- Herausgeber: John Wiley & Sons
- Kategorie: Fachliteratur
- Serie: Wiley Finance
- Sprache: Englisch
The #1 best-selling guide to business valuation, newly updated and revised
Valuation Workbook is the companion book to the eighth edition of McKinsey's Valuation, the gold standard in measuring and managing valuation for more than 30 years. This workbook has been used by individuals and professors to gain a deeper understanding of valuation.
Called "the best practitioners' guide to valuation" by The Financial Times and "the most influential contemporary books about the world economy" by The Economist, the newly revised eighth McKinsey's long tradition of excellence. In the book, a team of veteran McKinsey & Company professionals walk you through the foundations of valuation, advanced topics like valuing high-growth companies and digital assets, and managerial topics such as corporate portfolio strategy and acquisitions. You'll also discover:
- Questions and answers about the content in each chapter
- Best practices to apply valuation to business strategy questions and communicate with investors
- How to analyze and forecast performance, the cost of capital, and put it all together in a coherent valuation
McKinsey & Company has been helping businesses, governments, non-profit organizations and other institutions grow and thrive for almost 100 years. Valuation's authors draw on that storied history to bring you the most relevant, accurate, intuitive, and practical guide to valuation on the market today.
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Table of Contents
Cover
Table of Contents
Title Page
Copyright
About the Authors
Introduction
Part One: Questions
1 Why Value Value?
2 Finance in a Nutshell
3 Fundamental Principles of Value Creation
4 Risk and the Opportunity Cost of Capital
5 The Alchemy of Stock Market Performance
6 The Stock Market and Economic Fundamentals
7 The Stock Market Is Smarter than You Think
8 Return on Invested Capital
9 Growth
10 Frameworks for Valuation
11 Reorganizing the Financial Statements
12 Analyzing Performance and Competitive Position
13 Forecasting Performance
14 Estimating Continuing Value
15 Estimating the Cost of Capital
16 Moving from Enterprise Value to Value per Share
17 Analyzing the Results
18 Using Multiples
19 Valuation by Parts
20 Taxes
21 Nonoperating Items, Provisions, and Reserves
22 Leases
23 Retirement Obligations
24 Measuring Performance in Capital-Light Businesses
25 CFROI and Other Ways to Measure Return on Capital
26 Inflation
27 Cross-Border Valuation
28 Corporate PortfolioStrategy
29 Strategic Management: Analytics
30 Strategic Management: Governance, Processes, and Decision-Making
31 Mergers and Acquisitions
32 Divestitures
33 Digital Initiatives and Companies
34 Sustainability
35 Capital Structure, Dividends, and Share Repurchases
36 Investor Communications
37 Leveraged Buyouts
38 Venture Capital
39 High-Growth Companies
40 Flexibility and Options
41 Emerging Markets
42 Cyclical Companies
43 Banks
Part Two: Solutions
1 Why Value Value?
2 Finance in a Nutshell
3 Fundamental Principles of Value Creation
4 Risk and the Opportunity Cost of Capital
5 The Alchemy of Stock Market Performance
6 The Stock Market and Economic Fundamentals
7 The Stock Market Is Smarter than You Think
8 Return on Invested Capital
9 Growth
10 Frameworks for Valuation
11 Reorganizing the Financial Statements
12 Analyzing Performance and Competitive Position
13 Forecasting Performance
14 Estimating Continuing Value
15 Estimating the Cost of Capital
16 Moving from Enterprise Value to Value per Share
17 Analyzing the Results
18 Using Multiples
19 Valuation by Parts
20 Taxes
21 Nonoperating Items, Provisions, and Reserves
22 Leases
23 Retirement Obligations
24 Measuring Performance in Capital-Light Businesses
25 CFROI and Other Ways to Measure Return on Capital
26 Inflation
27 Cross-Border Valuation
28 Corporate PortfolioStrategy
29 Strategic Management: Analytics
30 Strategic Management: Governance, Processes, and Decision-Making
31 Mergers and Acquisitions
32 Divestitures
33 Digital Initiatives and Companies
34 Sustainability
35 Capital Structure, Dividends, and Share Repurchases
36 Investor Communications
37 Leveraged Buyouts
38 Venture Capital
39 High-Growth Companies
40 Flexibility and Options
41 Emerging Markets
42 Cyclical Companies
43 Banks
Index
End User License Agreement
Guide
Cover
Table of Contents
Title Page
Copyright
About the Authors
Introduction
Begin Reading
Index
End User License Agreement
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VALUATION WORKBOOK
EIGHTH EDITION
McKinsey & Company
Tim Koller
Marc Goedhart
David Wessels
Michael Cichello
Copyright © 1990, 1994, 2000, 2005, 2010, 2015, 2021, 2025 by McKinsey & Company. All rights reserved.
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Workbook: ISBN 9781394279449epub: 9781394279456ePDF: 9781394279463Cloth edition: ISBN 9781394279418Cloth edition with DCF Model download: ISBN 9781394279517University edition: ISBN 9781394279470DCF Model Web download: 9781394279500
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About the Authors
The authors are all current or former consultants of McKinsey & Company's Strategy & Corporate Finance Practice. Together, they have more than 100 years of experience in consulting and financial education.
* * *
Tim Koller is a partner in McKinsey's Denver, Colorado, office and spent most of his career in the firm's New York office. He is a founder of McKinsey's Strategy and Corporate Finance Insights team, a global group of corporate-finance expert consultants. In his 40 years in consulting, Tim has served clients globally on corporate strategy and capital markets, acquisitions and divestitures, and strategic planning and resource allocation. He leads the firm's research activities in valuation and capital markets. Before joining McKinsey, he worked with Stern Stewart & Company and with Mobil Corporation. He received his MBA from the University of Chicago.
* * *
Marc Goedhart is a senior knowledge expert in McKinsey's Amsterdam office and an endowed professor of corporate valuation at Rotterdam School of Management (RSM), Erasmus University. Over the past 30 years, Marc has served clients across Europe on portfolio restructuring, M&A transactions, and performance management. He received his PhD in finance from Erasmus University.
* * *
David Wessels is an adjunct professor of finance at the Wharton School of the University of Pennsylvania. Named by Bloomberg Businessweek as one of America's top business school instructors, he teaches courses on corporate valuation and private equity at the MBA and executive MBA levels. David is also a director in Wharton's executive education group, serving on the executive development faculties of several Fortune 500 companies. A former consultant with McKinsey, he received his PhD from the University of California at Los Angeles.
* * *
Michael Cichello is a finance professor and Academic Director for the Masters in Finance and Masters in Quantitative Finance programs at the Robert H. Smith School of Business at the University of Maryland. He teaches corporate valuation to undergraduate, MBA, and Executive MBA students and works with executives of several Fortune 500 companies to implement value-creating opportunities. His research explores managerial incentives, corporate governance, and financial contracting schemes. Professor Cichello received a PhD in finance from Michigan State University.
* * *
McKinsey & Company is a global management consulting firm, working with clients across the private, public, and social sectors. McKinsey combines bold strategies and transformative technologies to help organizations innovate more sustainably, achieve lasting gains in performance, and build work forces that will thrive for this generation and the next.
Introduction
The purpose of any workbook is to actively engage the reader/learner in the transfer of knowledge from author to reader. Although there are many levels at which knowledge can be transferred, the Valuation Workbook endeavors to provide the following three services:
A walk-through accompaniment to
Valuation: Measuring and Managing the Value of Companies
, eighth edition
A summary of each chapter
Tests of comprehension and skills of many types
Multiple-choice questions pique your memory as you read the text. Lists and table completions force you to actively rearrange concepts, explicitly or implicitly, within the text. Calculation questions allow you to apply the skills deployed by the authors in accomplishing the analysis called valuation.
Our aim is to encourage you to question what you read against the background of your own business experience and to think about new ways to analyze and approach valuation issues.
Part OneQuestions
1Why Value Value?
The chief measures for judging a company are its ability to create value for its shareholders and the amount of total value it creates. Corporations that create value in the long term tend to increase the welfare of shareholders and employees as well as improve customer satisfaction; furthermore, they tend to behave more responsibly as corporate entities. Ignoring the importance of value creation not only hurts the company but leads to detrimental results such as market bubbles.
Value creation occurs when a company generates cash flows at rates of return that exceed the cost of capital. Accomplishing this goal usually requires that the company have a competitive advantage. Activities such as leverage and accounting changes do not create value. Frequently, managers shortsightedly emphasize earnings per share (EPS); in fact, a poll of managers found that most managers would reduce discretionary value-creating activities such as research and development (R&D) in order to meet short-term earnings targets. One method to meet earnings targets is to cut costs, which may have short-term benefits but can have long-run detrimental effects.
Data from both Europe and the United States found that companies that created the most shareholder value showed ____________ employment growth.
The _______________ in the late 1990s, and the ___________ in 2007–08, arose largely because companies and banks focused on ___________ over ____________.
Maximizing current share price is not equivalent to maximizing long-term value because ____________.
Discretionary expenses that managers can slash in order to pump up short-term profits include _______________.
During the internet boom of the late 1990s, many firms lost sight of value creation principles by blindly pursuing ____________ without ____________.
Evidence that companies with a long strategic horizon create better total shareholder returns (TSR) than those run with a short-term mindset include(s):
Banks that forwent short-term profits during the real estate bubble of the 2000s earned much better TSR over the longer term.
Companies with a long-term focus tended to generate superior TSR.
Investments in research and development (R&D) have correlated powerfully with long-term TSR.
I and II only.
II and III only.
I and III only.
I, II, and III.
Paying attention to which of the following tends to lead to a company creating long-term value for shareholders?
Cash flow.
Earnings per share.
Growth.
Return on invested capital.
I and II only.
II and III only.
II, III, and IV only.
I, III, and IV only.
A firm that grows rapidly will:
Always create value.
Create value if the return on invested capital (ROIC) is greater than the cost of obtaining funds.
Create value if the ROIC is less than the cost of obtaining funds.
Create value if the firm increases market share.
In order to create long-term value, companies must:
Focus on keeping costs at a minimum.
Find the optimal debt-to-equity ratio.
Seek and exploit new sources of competitive advantage.
Monitor and follow macroeconomic trends.
Focus on short-term results by banks was a contributing factor to the financial crisis of 2007–08.
True
False
2Finance in a Nutshell
Companies create value when they earn a return on invested capital (ROIC) greater than their opportunity cost of capital. If the ROIC is at or below the cost of capital, growth may not create value. Companies should aim to find the combination of growth and ROIC that drives the highest discounted value of their cash flows. In so doing, they should consider that performance in the stock market may differ from intrinsic value creation, generally as a result of changes in investors' expectations.
To illustrate how value creation works, this chapter follows a company from its early years through going public. Throughout the discussion, attention is given to key measures of performance, such as ROIC, growth, and company value based on discounted cash flow (DCF). Five core ideas about value creation and its measurement are illustrated:
In the real market, you create value by earning a return on your invested capital greater than the opportunity cost of capital.
The more you can invest at returns above the cost of capital, the more value you create. That is, growth creates more value as long as the return on invested capital exceeds the cost of capital.
You should select strategies that maximize the present value of future expected cash flows or economic profit (EP). The answer is the same regardless of which approach you choose.
The value of a company's shares in the stock market equals the intrinsic value based on the market's expectations of future performance, but the market's expectations of future performance may not be same as the company's.
The returns that shareholders earn depend on changes in expectations as much as on the actual performance of the company.
Lily's Dresses creates value if it generates a ________ return on its invested capital (ROIC) than what they could earn if they invested their capital elsewhere.
Logan's Stores' superior growth over Lily's Dresses was not translating into a ________ ROIC because Logan's Stores had to invest ________ in order to grow and had a ________ differentiated product than Lily's Dresses.
Lily and Nate can address the trade-off between short-term decline in ROIC and long-term increase in ROIC by estimating whether the expansion is valuable through ________________________.
Lily and Nate should keep the ________-performing stores open because even though they have ________ ROICs than the other stores, these ________-performing stores still have ROICs ________ than the cost of capital. Thus, these stores still create additional ___________ by staying open.
The intrinsic value of Lily's Emporium is based on the ________________________, while the share price is based on ________________________. Investors would want to buy Lily's stock when their intrinsic value estimate is ________ than the current stock price.
As Lily's Emporium expands, it needs a planning and control system that incorporates both ________- and ________-looking measures that are ________________.
(True/False) Suppose that an investor bought shares in Lily's Emporium and held them for five years. If the firm generated ROICs above their cost of capital, this means that the investor had returns above the cost of capital.
(True/False) Both the DCF and EP methods should yield the same valuations if properly applied.
4Risk and the Opportunity Cost of Capital
A company's cost of capital is critical for determining value creation and for evaluating strategic decisions. It is the rate at which you discount future cash flows for a company or project. It is also the rate you compare with the return on invested capital to determine if the company is creating value. The cost of capital incorporates both the time value of money and the risk of investment in a company, business unit, or project.
The cost of capital is an opportunity cost, based on what investors could earn by investing their money elsewhere at the same level of risk. Only diversifiable risks affect a company's cost of capital. Other risks, which can be diversified, should only be reflected in the cash flow forecast using multiple cash flow scenarios.
Companies should take on all investments that have a positive expected value, regardless of their risk profile, unless the projects are so large that failure would threaten the viability of the entire company. Most executives are reluctant to take on smaller risky projects even if the returns are very high.
The ability of investors to diversify their portfolios means that only nondiversifiable risk affects the cost of capital. Companies in the same industry will have similar costs of capital. The risks they cannot diversify away are those that affect all companies—for example, exposure to economic cycles.
Certain projects carry what many investors see as high risk. Companies should not bump up the assumed cost of capital to reflect the uncertainty of risky projects. In doing so, they often end up rejecting good investment opportunities as a result. A better approach for determining the expected value of a project is to develop multiple cash flow scenarios, value them at the unadjusted cost of capital, and then apply probabilities for the value of each scenario to estimate the expected value of the project or company.
Using scenarios has several advantages, including (1) providing decision-makers with more information, (2) encouraging managers to develop strategies to mitigate specific risks, and (3) acknowledging the full range of possible outcomes.
In theory, a company should take on all projects or growth opportunities that have positive expected values even if there is high likelihood of failure, as long as the project is small enough that failure will not put the company in financial distress. In practice, companies tend to overweight the impact of losses from smaller projects, thereby missing value creation opportunities.
Executives making decisions for their companies should think about the company's risk profile, not their own. Corporations are designed to take risks and overcome the natural loss aversion of individuals. To overcome loss aversion and make better investment decisions, individuals and organizations must learn to frame choices in the context of the entire company's success, not the individual project's performance.
Although hedging may reduce the short-term cash flow volatility, it will have little effect on the company's valuation based on long-term cash flows. Some risks, such as some forms of commodity price risk, can be managed by shareholders themselves. Other risks, such as some forms of currency risk, are harder for shareholders to manage. The general rule is to avoid hedging the first type of risk but hedge the second if possible.
A firm's cost of capital is driven by investors' ____________, because firm managers have a fiduciary responsibility to the company's investors.
The cost of capital incorporates both the ____________ and the ____________ in a company, business unit, or project.
Within a company, individual business units can have different costs of capital if ________________.
The ability of investors to diversify their portfolios means that only ____________ risk affects the cost of capital.
Because ____________ risk generally affects all companies in the same industry in the same way, a company's ____________ is what primarily drives its cost of capital.
Certain projects carry high risks. Managers should not ignore these risks, but should explicitly include them in ____________, not _______________.
Some advantages to using a scenario expected cash flow approach over an ad hoc risk premium approach when evaluating high-risk projects are:
Managers should take on all projects or growth opportunities that have ___________________ even if there is high likelihood of failure, so long as the project is __________________________.
Managers should hedge the risks that __________________________.
5The Alchemy of Stock Market Performance
The expectations treadmill is the name for a problem faced by high-performing managers who try to meet the high market expectations that result from the high level of performance in recent periods. It's the reason that, in the short term, extraordinary managers may deliver only mediocre total shareholder returns (TSR). It's also the dynamic behind the adage that a good company and a good investment may not be the same. An example of this is a comparison of the company and stock performance of Ulta Beauty and Walmart from 2018 to 2023. Although Ulta Beauty outperformed Walmart in both revenue growth (11 percent versus 5 percent) and ROIC (35 percent versus 17 percent), the annualized TSRs were 12 and 13 percent, respectively. Investors in Ulta Beauty had relatively high expectations in 2018 relative to investors in Walmart, as illustrated by EV/NOPAT multiples for Ulta Beauty being 1.3 times those of Walmart.
Decomposing TSR can give better insights into a company's true performance and in setting new targets. There is already the traditional method of decomposing TSR into three parts: (1) percent change in earnings, (2) percent change in P/E, and (3) dividend yield. A clearer picture can be found from breaking TSR into five parts: (1) the value generated from revenue growth, (2) investment required to generate revenue growth, (3) the impact of a change in margin on net income growth, (4) the starting ratio of net income to market value, and (5) the change in the P/E ratio. A more thorough analysis can explain why a small decline in TSR in the short run to adjust expectations may be preferable to desperately trying to maintain TSR through ill-advised acquisitions and ventures.
Use the following financials to answer Questions 1 through 4.
$ million
Base year
1 year later
Invested capital
$200
$208
Earnings
$20
$22
P/E
12
12.6
Equity value
240
276
Dividends
$10
$12
What is the TSR from performance?
−2.0 percent.
−0.5 percent.
4.5 percent.
6.7 percent.
What is the dividend yield?
4.2 percent.
4.8 percent.
5.0 percent.
6.0 percent.
What is the zero-growth return?
8.3 percent.
10.5 percent.
12.5 percent.
15.3 percent.
What is the TSR?
14.0 percent.
15.0 percent.
15.5 percent.
20.0 percent.
Using the traditional approach, an analyst can break down TSR into two or three components.
List the components in the two-component breakdown:
List the components in the three-component breakdown:
