Value Enhancement: A Discounted Cash Flow Valuation Framework

In much of this book, we have taken on the role of a passive investor valuing going concerns. In this chapter, we switch roles and look at valuation from the perspective of an investor who can make a difference in the way a company is run and hence its value. Our focus is therefore on how actions taken by managers and owners can change the value of a firm.

We will use the discounted cash flow framework developed in earlier parts of the book to explore the requirements for an action to be value creating, and then go on to examine the different ways in which a firm can create value. In the process, we also examine the role that marketing decisions, production decisions, and strategic decisions all have in value creation.