Hailed by financial professionals worldwide as the single best guide of its kind, Valuation, Fourth Edition is thoroughly revised and expanded to reflect business conditions in today's volatile global economy. Valuation provides up-to-date insights and practical advice on how to create, manage, and measure an organization's value. Along with all-new case studies that illustrate how valuation techniques and principles are applied in real-world situations, this comprehensive guide has been updated to reflect the events of the Internet bubble and its effect on stock markets, new developments in academic finance, changes in accounting rules (both U. S. and IFRS), and an enhanced global perspective. This edition contains the solid framework that managers at all levels, investors, and students have come to trust.

McKINSEY & COMPANY is a management consulting firm that
helps leading corporations and organizations make distinctive,
lasting, and substantial improvements in their performance. Over
the past seven decades, the firm's primary objective has remained
constant: to serve as an organization's most trusted external
advisor on critical issues facing senior management. With
consultants deployed from over eighty offices in more than forty
countries, McKinsey advises companies on strategic, operational,
organizational, financial, and technological issues. The firm has
extensive experience in all major industry sectors and primary
functional areas, as well as in-depth expertise in high-priority
areas for today's business leaders.

Tim Koller is a partner in McKinsey's New York office.
Tim has served clients in North America and Europe on corporate
strategy and issues concerning capital markets, M&A
transactions, and value-based management. He leads the firm's
research activities in valuation and capital markets issues. He
received his MBA from the University of Chicago.

Marc Goedhart is an associate principal in McKinsey's
Amsterdam office. Marc has served clients across Europe on
portfolio restructuring, issues concerning capital markets, and
M&A transactions. He received a PhD in finance from Erasmus
University Rotterdam.

David Wessels is an adjunct Professor of Finance and
director of executive education at the Wharton School of the
University of Pennsylvania. Named by BusinessWeek as one of
America's top business school instructors, he teaches corporate
valuation at the MBA and Executive MBA levels. David received his
PhD from the University of California at Los Angeles.

"The best valuation book just got better. This edition's greater emphasis on what drives value and how to measure it will improve the way practitioners conduct financial analysis and, ultimately, make strategic decisions. It is required reading for all executives."
Professor Benjamin C. Esty, Harvard Business School author of Modern Project Finance: A Casebook

"The bible in its field. Anyone wanting to understand what drives corporate value should read this latest edition."
Dr. Raymund Breu, Chief Financial Officer, Novartis AG

"Valuation gets to the heart of how to measure and manage value in a company. Whether you are evaluating an acquisition, restructuring a corporation, or formulating strategy, this book will help you do it well."
John A. Manzoni, Chief Executive Refining and Marketing, BP plc

Praise for the First Edition

"A 'how-to' guide for corporate executives who want to get at the unrealized shareholder values trapped in public companies."
The New York Times

"The book's clarity and comprehensive coverage make it one of the best practitioners' guides to valuation."
Financial Times

Part One: Foundations of Value.

1. Why Maximize Value?

2. The Value Manager.

3. Fundamental Principles of Value Creation.

4. Do Fundamentals Really Drive the Stock Market?

Part Two: Core Valuation Techniques.

5. Frameworks for Valuation.

6. Thinking about Return on Invested Capital and Growth.

7. Analyzing Historical Performance.

8. Forecasting Performance.

9. Estimating Continuing Value.

10. Estimating the Cost of Capital.

11. Calculating and Interpreting Results.

12. Using Multiples for Valuation.

Part Three: Making Value Happen.

13. Performance Measurement.

14. Performance Management.

15. Creating Value through Mergers and Acquisitions.

16. Creating Value through Divestitures.

17. Capital Structure.

18. Investor Communications.

Part Four: Advanced Valuation Issues.

19. Valuing Multibusiness Companies.

20. Valuing Flexibility.

21. Cross-Border Valuation.

22. Valuation in Emerging Markets.

23. Valuing High-Growth Companies.

24. Valuing Cyclical Companies.

25. Valuing Financial Institutions.

Appendix A: Economic Profit and the Key Value Driver
Formula.

Appendix B: Discounted Economic Profit Equals Discounted Free
Cash Flow.

Appendix C: Adjusted Present Value Equals Discounted Free Cash
Flow.

Appendix D: Levering and Unlevering the Cost of Equity.

Appendix E: Leverage and the Price-Earnings Multiple.

Index.