Driving Shareholder Value Managing for the New Millennium. Dr. Roger A. Morin Georgia State University, Distinguished Professor of Finance Chairman & CEO Utility Research International. FI 8360 Lecture #2 Roadmap. Why Value Value Value and Capital Markets The Value Manager
Driving Shareholder ValueManaging for the New Millennium
Dr. Roger A. Morin
Georgia State University, Distinguished Professor of Finance
Chairman & CEO Utility Research International
Why Value Value?
Cash flow and Risk
Future value corresponds to future and uncertain business cash flows, Ct. So we discount expected cash flows
Present Value = -------------
t=0 (1 + k)t
Because business cash flows occur over many future periods, we locate them in time, then discount and add them all.
Because business cash flows are risky, investors demand a higher return: the discount rate, k, contains a risk premium.
Value = Cash Flowt
t=0 (1 + Cost of Capital)t
Drivers of Value
Employee & Investor
VBM plays a significant role in each stage of the management process
Financial Policy Assessment