Corporate Valuation
Corporate Valuation: Theory, Evidence & Practice
Robert W. Holthausen and Mark E. Zmijewski
What it’s about
Professors Holthausen (Wharton) and Zmijewski (Booth) provide an amazingly comprehensive treatment of the topic of corporate valuation. In addition to covering the essentials, from financial statement analysis and defining Free Cash Flow, to estimating betas and explaining interest tax shields, they even devote an entire chapter to estimating the opportunity cost of capital for debt.
Why I like it
To my knowledge, this book provides the most complete coverage of the many elements of a Discounted Cash Flow valuation of any book available. The prose is clear, the theories are sound, and the examples are plentiful and detailed to enable the reader to go from theory to practice on every element. Among other things, this book does an excellent job of explaining and demonstrating how to keep track of interest tax shields, and how to value them using either the Adjusted Present Value (APV) method or the more familiar Weighted Average Cost of Capital (WACC) method. My favorite feature of this book is its excellent coverage of the cost of debt, dedicating an entire chapter (Chapter 9) to this often-overlooked topic.