Value Creation

Source: Evernote 20120801_20131231
http://people.stern.nyu.edu/adamodar/

• The Paths to Value Creation:  Using DCF  framework, there are four basic ways in which value of firm can be enhanced
  • cash flow from existing assets to the firm can be increased
    • increasing after tax earnings from assets in place or
    • reducing reinvestment needs net capital expenditures or working capital
  • the expected growth rate in these cash flows can be increased by either
    • increasing the rate of reinvestment in the firm
    • improving the return on capital on those reinvestments
  • the length of high growth period can be extended to allow for more years of high growth
  • the coast of capital can be reduced
    • reducing operating risk of investment assets
    • changing the financial mix
    • changing the financing composition
• Value Creating Growth… Modes of organic growth vary in value creation intensity…
  • New product market development
  • expanding an existing market
  • maintaining/growing share in growing market
  • competition for share in stable market
  • acq (25th to 75th percentile result)

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