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Valuation: Measuring and Managing the Value of Companies, Fifth Edition
Chapter 33 Solutions
Valuation in Emerging Markets
1. Purchasing power parity (PPP) means that the goods and services will sell for the same
price in different countries, because the exchange rate will adjust to make the prices the
2. Companies in emerging markets face risks associated with market position and industry
3. The obvious benefit of scenario DCF is that the analysis provides estimates of trajectories
of future cash flows, which provide insights into what can happen so the managers can
4. The recommended approach is to incorporate the risks in the projections of cash flows.
When addressing political risk, for example, in the scenarios of forecasts, the managers
5. The key issue is whether the volatility is diversifiable or not. Since world markets are
6. If done correctly, the two methods should produce the same result. Incorporating the risk
7. Several properties of the companies and countries require consideration in choosing
between the betas. One of the important properties is the relative amount of leverage used
8. Since the focus is on the after-tax cash flows, the simplest course of action is to make an
adjustment by subtracting the taxes from the cash flows and then to discount them using
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