Preface to the Third Edition xx Chapter 1 The Dark Side of Valuation 1 Foundations of Value 1 Valuation Across Time 7 Valuation Across the Life Cycle 9 Valuation Across the Business Spectrum 15 The Dark Side of Valuation Beckons 23 Conclusion 26 PART I: ENLIGHTENMENT: THE TOOLS Chapter 2 Intrinsic Valuation 29 Discounted Cash Flow Valuation 29 Variations on DCF Valuation 63 What Do Intrinsic Valuation Models Tell Us? 73 Conclusion 74 Chapter 3 Probabilistic Valuation: Scenario Analysis, Decision Trees, and Simulations 75 Scenario Analysis 75 Decision Trees 79 Simulations 88 An Overall View of Probabilistic Risk Assessment Approaches 101 Conclusion 104 Chapter 4 Relative Valuation/Pricing 105 What Is Relative Valuation? 105 The Ubiquity of Relative Valuation 107 Reasons for Popularity and Potential Pitfalls 107 Standardized Values and Multiples 109 The Four Basic Steps of Using Multiples 111 Reconciling Relative and Intrinsic Valuations 131 Conclusion 132 Chapter 5 Real Options Valuation 133 The Essence of Real Options 133 Real Options, Risk-Adjusted Value, and Probabilistic Assessments 135 Real Options Examples 137 Caveats for Real Options 153 Conclusion 155 Appendix: Basics of Options and Option Pricing 156 PART II: THE DARK SIDE OF MACRO INPUTS Chapter 6 A Shaky Base: A "Risky" Risk-Free Rate 169 What Is a Risk-Free Asset? 169 Why Do Risk-Free Rates Matter? 170 Estimating a Risk-Free Rate 171 Issues in Estimating Risk-Free Rates 180 Closing Thoughts on Risk-Free Rates 194 Conclusion 196 Appendix 6.1 196 Chapter 7 Risky Ventures: Assessing the Price of Risk 199 Why Do Risk Premiums Matter? 199 What Are the Determinants of Risk Premiums? 202 Standard Approaches for Estimating Risk Premiums 204 Equity Risk Premiums 205 Default Spreads 207 Problem Scenarios 208 The Dark Side 209 The Light Side 210 Conclusion 226 Appendix 7.1 227 Chapter 8 Macro Matters: The Real Economy 231 Growth in the Real Economy 231 The Dark Side 237 The Light Side 238 Expected Inflation 239 The Dark Side 246 The Light Side 247 Exchange Rates 248 The Dark Side 253 The Light Side 255 Conclusion 256 PART III: THE DARK SIDE ACROSS THE LIFE CYCLE Chapter 9 Baby Steps: Young and Start-Up Companies 259 Young Companies in the Economy 259 Valuation Issues 263 The Dark Side 268 The Light Side 275 Conclusion 321 Chapter 10 Shooting Stars: Valuing Growth Companies 323 Growth Companies 323 Characteristics of Growth Companies 326 Valuation Issues 328 The Dark Side of Valuation 333 The Light Side of Valuation 343 Conclusion 375 Chapter 11 The Grown-Ups: Mature Companies 377 Mature Companies in the Economy 377 Valuation Issues 380 The Dark Side of Valuation 384 Relative Valuation 391 The Light Side of Valuation 392 Conclusion 430 Chapter 12 Winding Down: Declining Companies 431 Declining Companies in the Economy 431 Valuation Issues 433 The Dark Side of Valuation 438 The Light Side of Valuation 446 Conclusion 491 PART IV: THE DARK SIDE ACROSS COMPANY TYPES Chapter 13 Ups and Downs: Cyclical and Commodity Companies 493 The Setting 493 The Dark Side of Valuation 496 The Light Side of Valuation 502 Conclusion 524 Chapter 14 Mark to Market: Valuing Financial Services Companies 525 Financial Services Firms: The Big Picture 525 Characteristics of Financial Services Firms 528 The Dark Side of Valuation 532 The Light Side of Valuation 536 Conclusion 560 Chapter 15 Invisible Investments: Valuing Firms with Intangible Assets 561 Firms with Intangible Assets 561 The Dark Side of Valuation 567 The Light Side of Valuation 572 Conclusion 604 Chapter 16 Volatility Rules: Emerging-Market Companies 607 The Role of Emerging-Market Companies 607 The Dark Side of Valuation 610 The Light Side of Valuation 614 Conclusion 639 Chapter 17 Going to Pieces: Disaggregated Value 641 Aggregation versus Disaggregation 641 Multinational Conglomerates 642 The Dark Side of Valuation 648 The Light Side of Valuation 651 User/Subscriber/Customer Companies 677 Conclusion 694 Chapter 18 The Cynic''s Corner: Value versus Price 695 Value versus Price 695 Investing versus Trading 696 The Right Approach 699 Categorizing Investments 702 The Questionable Investments 716 Conclusion 731 PART V: THE FINALE Chapter 19 The Jedi Way: Vanquishing the Dark Side 733 Enlightening Propositions 733 Conclusion 742 Index 743.