The influential valuation book by an author team from McKinsey recommends the so-called value driver formula rather than the Gordon formula for the continuing value in the post-horizon period in the discounted cash flow model for firm valuation. This recommendation has had considerable impact on...

In the abnormal earnings growth (AEG) model of Ohlson and Juettner-Nauroth (2005), there is one interest rate and no taxes. Their model focuses on bottom-line earnings and dividends and is hence viewed as an equity-level model. We first extend this model to a firm-level model based on operating...

Loan subsidies are sometimes offered in connection with investment projects. It is convenient to view such subsidies as financing side effects providing value additions to project net present values without loan subsidies. A number of different methods for loan subsidy valuation have been...

The forecasting of operating lease expense in valuation models like the discounted dividends model is more complex than the forecasting of non-lease cash operating expense. The reason is that lease expense depends on past real growth and inflation, due to the long lives of the leased assets,...

The discounted cash flow model, like other firm valuation models, proceeds in two periods. For each year in the explicit forecast period, there is an individual forecast of free cash flow. On the other hand, all of the years in the post-horizon period are represented through one single...

Operating leases are quite important in some industries. There are two possible errors that should be avoided when valuing a company with operating leases. In the first place, one should not neglect the implied lease debt. Such neglect distorts the calculation of free cash flow, required rate of...

The Swedish finance company crisis was a kind of "run" that happened in September, 1990. It marked the beginning of the Swedish banking crisis of the early 1990's. The crisis was initially focused on the finance company Nyckeln. The specific negative information about Nyckeln is identified, as...