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Methods and Models in Applied Corporate Finance
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Every day, businesses face decision choices. For example, should a bank choose to expand organically by opening new branches, or should it expand by acquiring another bank with its own network of branches. Or, should a technology company release a new version of a product line now, and thereby cannibalize sales of its existing product
line, or should it wait a year at the risk of giving its competitors time to catch up. The key to success in business is to make sound, or value-creating, business decisions. Every choice a business manager can potentially make has risk associated with it. 1 In turn, every choice also has some upside, or positive return, associated with it. A sound decision is one that balances this risk and return to create value for the owners of the business, whether those are public shareholders or a private ownership group. 2 However, to make value-creating business decisions, a manager needs to be able to first quantify, or measure, the risk and return inherent in each of the decision choices he is facing, and then convert these risk-return combinations into ex-ante measures of value creation. This is where the topic of valuation comes into play. Valuation is simply the conversion of risk and return into monetary value. The value could be of intangible assets like ideas or potential projects, or it could be of tangible assets like a manufacturing plant or the shares of a business
George Chacko and Carolyn L. Evans - Personal Name
1st Edition
13: 978-0-13-290522-
NONE
Methods and Models in Applied Corporate Finance
Banking And Finance
English
Pearson Education, Inc
2014
USA
1-35
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