McKinsey & Company's #1 best-selling guide to corporate valuation, now in its sixth editionValuation is the single best guide of its kind, helping financial professionals worldwide excel at measuring, managing, and maximizing shareholder and company value. This new sixth edition provides insights on the strategic advantages of value-based management, complete detailed instruction, and nuances managers should know about valuation and valuation techniques as applied to different industries, emerging markets, and other special situations.Valuation lies at the crossroads of corporate strategy and finance. In today's economy, it has become an essential role -- and one that requires excellence at all points. This guide shows you everything you need to know, and gives you the understanding you need to be effective.* Estimate the value of business strategies to drive better decision making* Understand which business units a corporate parent is best positioned to own* Assess major transactions, including acquisitions, divestitures, and restructurings* Design a capital structure that supports strategy and minimizes riskAs the valuation function becomes ever more central to long- and short-term strategy, analysts and managers need an authoritative reference to turn to for answers to challenging situations. Valuation stands ahead of the field for its reputation, quality, and prestige, putting the solutions you need right at your fingertips.

About the Authors ixPreface xiAcknowledgments xvPart One Foundations of Value1 Why Value Value? 32 Fundamental Principles of Value Creation 173 Conservation of Value and the Role of Risk 354 The Alchemy of Stock Market Performance 495 The Stock Market Is Smarter Than You Think 656 Return on Invested Capital 937 Growth 115Part Two Core Valuation Techniques8 Frameworks for Valuation 1359 Reorganizing the Financial Statements 16510 Analyzing Performance 20111 Forecasting Performance 22112 Estimating Continuing Value 24713 Estimating the Cost of Capital 26914 Moving from Enterprise Value to Value per Share 30115 Analyzing the Results 32116 Using Multiples 33117 Valuation by Parts 353Part Three Advanced Valuation Techniques18 Taxes 37319 Nonoperating Items, Provisions, and Reserves 38720 Leases and Retirement Obligations 40521 Alternative Ways to Measure Return on Capital 42322 Inflation 44523 Cross-Border Valuation 45924 Case Study: Heineken 481Part Four Managing for Value25 Corporate Portfolio Strategy 52526 Performance Management 54327 Mergers and Acquisitions 56528 Divestitures 59329 Capital Structure, Dividends, and Share Repurchases 61130 Investor Communications 643Part Five Special Situations31 Emerging Markets 66732 Valuing High-Growth Companies 69133 Cyclical Companies 70534 Banks 71335 Flexibility 741Appendix A Discounted Economic Profit Equals Discounted Free Cash Flow 775Appendix B Derivation of Free Cash Flow, Weighted Average Cost of Capital, and Adjusted Present Value 781Appendix C Levering and Unlevering the Cost of Equity 787Appendix D Leverage and the Price-to-Earnings Multiple 795Appendix E Other Capital Structure Issues 799Appendix F Technical Issues in Estimating the Market Risk Premium 805Index 809