Value Creation and Enhancement: Back to the Future

Preprint OPEN
Aswath Damodaran (1999)
  • Subject:
    acm: ComputingMilieux_THECOMPUTINGPROFESSION

In recent years, firms have turned to their attention increasingly to ways in which they can increase their value. A number of competing measures, each with claims to being the "best" approach to value creation, have been developed and marketed by investment banking firms and consulting firms. In this paper, we begin with a generic discounted cash flow model, and consider the ways in which value can be created or destroyed in a firm. We then look at two of the most widely used value enhancement measures, Economic Value Added and Cash Flow Return on Investment, and consider where these approaches yield similar
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