CAIRO BOOKS's Description
Firm valuation is currently a very exciting topic. It is interesting for those
economists engaged in either practice or theory, particularly for those in
finance. The literature on firm valuation recommends logical, quantitative
methods, which deal with establishing today's value of future free cash flows.
In this respect firm valuation is identical with the calculation of the
discounted cash flow, DCF. There are, however, different coexistent versions,
which seem to compete against each other. Entity approach and equity approach
are thus differentiated. Acronyms are often used, such as APV (adjusted present
value) or WACC (weighted average cost of capital), whereby these two concepts
are classified under entity approach.
Why are there several procedures and not just one? Do they all lead to the
same result? If not, where do the economic differences lie? If so, for what
purpose are different methods needed? And further: do the known procedures
suffice? Or are there situations where none of the concepts developed up to now
delivers the correct value of the firm? If so, how is the appropriate valuation
formula to be found? These questions are not just interesting for
theoreticians; even the practitioner who is confronted with the task of
marketing his or her results has to deal with it. The authors systematically
clarify the way in which these different variations of the DCF concept are
related throughout the book
ENDORSEMENTS FOR L?FFLER: DISCOUNTED 0-470-87044-3
"Compared with the huge number of books on pragmatic approaches to discounted
cash flow valuation, there are remarkably few that lay out the theoretical
underpinnings of this technique. Kruschwitz and L?ffler bring together the
theory in this area in a consistent and rigorous way that should be useful for
all serious students of the topic."
--Ian Cooper, London Business School
"This treatise on the market valuation of corporate cash flows offers the
first reconciliation of conventional cost-of-capital valuation models from the
corporate finance literature with state-pricing (or 'risk-neutral' pricing)
models subsequently developed on the basis of multi-period no-arbitrage
theories. Using an entertaining style, Kruschwitz and L?ffler develop a precise
and theoretically consistent definition of 'cost of capital', and provoke
readers to drop vague or contradictory alternatives."
--Darrell Duffie, Stanford University
"Handling firm and personal income taxes properly in valuation involves
complex considerations. This book offers a new, precise, clear and concise
theoretical path that is pleasant to read. Now it is the practitioners task to
translate this approach into real-world applications!"
--Wolfgang Wagner, PricewaterhouseCoopers
"It is an interesting book, which has some new results and it fills a gap in
the literature between the usual undergraduate material and the very abstract
PhD material in such books as that of Duffie (Dynamic Asset Pricing Theory).
The style is very engaging, which is rare in books pitched at this level."
--Martin Lally, University of Wellington