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Valuation: Measuring and Managing the Value of Companies, Sixth Edition
Chapter 1 Why Value Value?
Solutions
1. One benefit for companies that have a long-term perspective on value creation is that it leads
2. Managers know more than shareholders about the firm’s prospects and choices that have been
stock price in the short term versus long term.
3. The exclusive focus on corporate earnings neglects one of the two key components of long-term
4. Examples of complementary interests include IBM’s free Web-based resources on business
management; Novo Nordisk’s “triple bottom line” philosophy of social responsibility,
environmental soundness, and economic viability; and Best Buy’s efforts to reduce attrition
5. The most common feature of market crashes is the use of short-term debt to invest in long-term
6. No, getting bigger does not necessarily translate into creating value. Growth can harm value if
7. The board of directors and the shareholders could introduce incentive schemes where managers
