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A vital companion to the bestselling guide to corporate valuation Valuation Workbook, 7th Edition is the ideal companion to McKinsey's Valuation, helping you get a handle on difficult concepts and calculations before using them in the real world. This workbook reviews all things valuation, with chapter-by-chapter summaries and comprehensive questions and answers that allow you to test your knowledge and skills. Useful both in the classroom and for self-study, this must-have guide is essential for reviewing and applying the renowned McKinsey & Company approach to valuation and reinforces the major topics discussed in detail in the book. Fully updated to align with the latest edition of Valuation, this workbook is an invaluable learning tool for students and professionals alike and an essential part of the McKinsey Valuation suite.

Valuation Workbook, Seventh Edition - Step-by-Step Exercises and Tests to Help You Master Valuation

About the Authors ix





Introduction xi





Part One Questions





1 Why Value Value? 3





2 Finance in a Nutshell 5





3 Fundamental Principles of Value Creation 7





4 Risk and the Cost of Capital 11





5 The Alchemy of Stock Market Performance 15





6 Valuation of ESG and Digital Initiatives 19





7 The Stock Market is Smarter Than You Think 21





8 Return on Invested Capital 27





9 Growth 31





10 Frameworks for Valuation 35





11 Reorganizing the Financial Statements 39





12 Analyzing Performance 43





13 Forecasting Performance 47





14 Estimating Continuing Value 51





15 Estimating the Cost of Capital 55





16 Moving from Enterprise Value to Value per Share 59





17 Analyzing the Results 63





18 Using Multiples 67





19 Valuation by Parts 71





20 Taxes 75





21 Nonoperating Items, Provisions, and Reserves 77





22 Leases 81





23 Retirement Obligations 83





24 Measuring Performance in Capital-Light Businesses 85





25 Alternative Ways to Measure Return on Capital 89





26 Inflation 91





27 Cross-Border Valuation 95





28 Corporate Portfolio Strategy 99





29 Strategic Management: Analytics 103





30 Strategic Management: Mindsets and Behaviors 107





31 Mergers and Acquisitions 111





32 Divestitures 115





33 Capital Structure, Dividends, and Share Repurchases 119





34 Investor Communications 123





35 Emerging Markets 127





36 High-Growth Companies 129





37 Cyclical Companies 131





38 Banks 135





39 Flexibility 139





Part Two Solutions





1 Why Value Value? 145





2 Finance in a Nutshell 147





3 Fundamental Principles of Value Creation 149





4 Risk and the Cost of Capital 151





5 The Alchemy of Stock Market Performance 153





6 Valuation of ESG and Digital Initiatives 155





7 The Stock Market is Smarter Than You Think 157





8 Return on Invested Capital 159





9 Growth 161





10 Frameworks for Valuation 163





11 Reorganizing the Financial Statements 165





12 Analyzing Performance 167





13 Forecasting Performance 169





14 Estimating Continuing Value 173





15 Estimating the Cost of Capital 175





16 Moving from Enterprise Value to Value per Share 177





17 Analyzing the Results 179





18 Using Multiples 181





19 Valuation by Parts 183





20 Taxes 185





21 Nonoperating Items, Provisions, and Reserves 187





22 Leases 189





23 Retirement Obligations 193





24 Measuring Performance in Capital-Light Businesses 195





25 Alternative Ways to Measure Return on Capital 197





26 Inflation 199





27 Cross-Border Valuation 203





28 Corporate Portfolio Strategy 207





29 Strategic Management: Analytics 209





30 Strategic Management: Mindsets and Behaviors 211





31 Mergers and Acquisitions 213





32 Divestitures 215





33 Capital Structure, Dividends, and Share Repurchases 217





34 Investor Communications 219





35 Emerging Markets 223





36 High-Growth Companies 225





37 Cyclical Companies 227





38 Banks 229





39 Flexibility 231





Index 233