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Corporate Valuation
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Corporate Valuation
Theory, Evidence, & Practice

Third Edition
September 2026 | 1 000 pages | Cambridge Business Publishers
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Formerly published by Cambridge Business Publishers, now published by Sage

Corporate Valuation: Theory, Evidence, & Practice, Third Edition by Robert W. Holthausen and Mark E. Zmijewski is a definitive guide to valuing companies, businesses, and securities using the tools professionals rely on in real decision-making. Blending theory with empirical evidence, the book translates valuation frameworks into practical, step-by-step methods illustrated with real company data. Widely used in undergraduate, MBA, and professional programs at leading institutions, it equips readers with the skills needed to succeed in careers across finance, accounting, investment banking, and corporate strategy. Trusted for decades by academics and practitioners alike, this text also serves as an essential field guide long after graduation.

A Complete Teaching and Learning Package

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·       Instructor Resources/Ancillaries: Test banks, editable chapter-specific PowerPoint® slides, the solutions manual, data analytics solutions, and the assignment transition guide can be downloaded via the password-protected Instructor Resources site .

 
About the Authors
 
Preface
 
Chapter 1: Introduction to Valuation
Introduction

 
1.1 What Do We Mean by “The Value of a Company”?

 
1.2 The Economic Balance Sheet: Resources Equal Claims on Resources

 
1.3 Valuation Principles

 
1.4 Measuring the Value of the Firm

 
1.5 Measuring the Value of the Firm’s Equity

 
1.6 Real Options in Valuation

 
1.7 How Managers and Investors Use Valuation Models

 
1.8 An Overview of the Valuation Process

 
Summary and Key Concepts

 
Additional Reading and References

 
Exercises and Problems

 
Solutions for Review Exercises

 
 
Chapter 2: Financial Statement Analysis
Introduction

 
2.1 Sources of Information

 
2.2 How We Use Financial Ratios in Valuation

 
2.3 Identifying a Company’s Industry and Its Comparable Companies

 
2.4 The GAP, Inc.—An Illustration of the Calculation and Analysis of Financial Ratios

 
2.5 Measuring a Company’s Performance Using Accounting Rates of Return

 
2.6 Disaggregating the Return on Assets

 
2.7 Measuring a Company’s Cost Structure Using Expense Ratios

 
2.8 Analyzing a Company’s Asset Utilization Using Turnover Ratios

 
2.9 Illustration of Disaggregating Home Depot’s Rate of Return On Assets

 
2.10 Analyzing a Company’s Working Capital Management

 
2.11 Analyzing a Company’s Fixed Asset Structure and Capital Expenditures

 
2.12 Other Types of Financial Statement Relations—Per Employee, Per Unit of Capacity And Output Growth Rates, Trends, and Per Share

 
2.13 Analyzing a Company’s Financial Leverage and Financial Risk

 
2.14 Disaggregating the Return on (Common) Equity

 
2.15 Illustration of Analyzing Home Depot’s Financial Ratios

 
2.16 Assessing Competitive Advantage

 
2.17 Implementation and Measurement Issues

 
Summary and Key Concepts

 
Additional Reading and References

 
Exercises and Problems

 
Solutions for Review Exercises

 
 
Chapter 3: Measuring Free Cash Flows
Introduction

 
3.1 Introduction to Measuring Free Cash Flows

 
3.2 The Bob Adams Company Example

 
3.3 Cash Flow Statement Basics

 
3.4 The Relationships Between the Free Cash Flow Schedule and the Cash Flow Statement

 
3.5 Differences Between Book and Tax Accounting and the Effect on Income Tax Rates

 
3.6 Understanding and Analyzing Income Tax Disclosures

 
3.7 Measuring Free Cash Flows For Companies With Financing or Operating Leases

 
3.8 Effects of Interest Deduction Limitations and Net Operating Loss Carryforwards

 
Summary and Key Concepts

 
Additional Reading and References

 
Exercises and Problems

 
Solutions for Review Exercises

 
 
Chapter 4: Creating a Financial Model
Introduction

 
4.1 An Overview of the Process of Creating a Financial Model

 
4.2 Forecasting Starbucks Corporation (Starbucks)

 
4.3 Selecting and Forecasting the Forecast Drivers for the Company’s Operations (Steps 2 and 3)

 
4.4 Creating a Financial Model for the Company’s Operations (Step 4)

 
4.5 Stress Testing the Model and Assessing the Reasonableness of the Forecasts (Steps 5 and 6)

 
4.6 Incorporating the Company’s Capital Structure Strategy

 
4.7 Sensitivity and Scenario Analyses and Simulations

 
4.8 Forecasting Required Cash and Valuing Excess Cash

 
4.9 Forecasting Income Tax Rates and Payments

 
4.10 More Detailed Forecasts of Revenues and Capital Expenditures

 
4.11 Forecasting Financing and Operating Leases (Right-Of-Use Assets) and Lease Liabilities

 
Summary and Key Concepts

 
Additional Reading and References

 
Exercises and Problems

 
Solutions for Review Exercises

 
 
Chapter 5: The Adjusted Present Value and Weighted Average Cost of Capital Discounted Cash Flow Valuation Methods
Introduction

 
5.1 Creating Value from Financing

 
5.2 The Adjusted Present Value and Weighted Average Cost of Capital Valuation Models

 
5.3 The Andy Alper Company

 
5.4 The Discounted Equity Free Cash Flow Valuation Method

 
5.5 The Discounted Dividend Valuation Model

 
5.6 Useful Valuation Concepts to Keep in Mind

 
5.7 Comprehensive Example—Dennis Keller, Inc.

 
Summary and Key Concepts

 
Additional Reading and References

 
Exercises and Problems

 
Solutions for Review Exercises

 
 
Chapter 6: Measuring Continuing Value Using the Constant-Growth Perpetuity Model
Introduction

 
6.1 The Constant-Growth Perpetuity Model

 
6.2 Estimating the Long-Term Growth Rate for the Constant- Growth Perpetuity Model

 
6.3 Estimating the Base-Year Year Free Cash Flow

 
6.4 Real Growth and Value Creation in the Constant-Growth Perpetuity Model

 
6.5 Using Market Multiples To Assess The Reasonableness of The Continuing Value

 
Summary and Key Concepts

 
Additional Reading and References

 
Exercises and Problems

 
Solutions for Review Exercises

 
 
Chapter 7: The Excess Earnings (Residual Income) Valuation Method
Introduction

 
7.1 The Excess Cash Flow Valuation Framework

 
7.2 The Excess Earnings Valuation Framework

 
7.3 The Weighted Average Cost of Capital Form of the Model

 
7.4 The Adjusted Present Value Form of the Model

 
7.5 The Equity Discounted Excess Earnings Model

 
7.6 Possible Information Advantages of the Excess Earnings Valuation Method

 
Summary and Key Concepts

 
Additional Reading and References

 
Exercises and Problems

 
Solutions for Review Exercises

 
 
Chapter 8: Estimating the Equity Cost of Capital
Introduction

 
8.1 The Capital Asset Pricing Model

 
8.2 An Overview on Estimating the Equity Cost of Capital Using the Capital Asset Pricing Model

 
8.3 Estimating Beta

 
8.4 Effect of Temporary Interventions (“Shocks”) on Beta Estimates

 
8.5 Estimating the Market Risk Premium

 
8.6 Estimating the Risk-Free Rate of Return to Use in the CAPM

 
8.7 Putting the Pieces Together

 
8.8 Adjusting the Capital Asset Pricing Model for Market Capitalization

 
8.9 The Build-Up Method

 
8.10 Multi-Factor Models

 
8.11 Implied Cost of Capital Estimates

 
Summary and Key Concepts

 
Additional Reading and References

 
Exercises and Problems

 
Solutions for Review Exercises

 
 
Chapter 9: Measuring the Cost of Capital for Debt and Preferred Securities
Introduction

 
9.1 Types of Non-Common-Equity Securities

 
9.2 Credit Ratings, Recovery Rates, Default Rates, and Yield to Maturity versus the Cost of Debt

 
9.3 Credit Rating Models

 
9.4 Measuring the Debt and Preferred Stock Costs of Capital

 
9.5 Bankruptcy Prediction and Financial Distress Models

 
Summary and Key Concepts

 
Additional Reading and References

 
Appendix: An Overview of the Black-Scholes and Merton Option Pricing Models

 
Exercises and Problems

 
Solutions for Review Exercises

 
 
Chapter 10: Levering and Unlevering the Cost of Capital and Beta
Introduction

 
10.1 An Overview of the Unlevering and Levering Process

 
10.2 Selecting the Discount Rate and Measuring the Value of Interest Tax Shields

 
10.3 Levering the Unlevered Cost of Capital

 
10.4 Levering the Unlevered (Asset) Beta from the Capital Asset Pricing Model 491

 
10.5 Unlevering the Equity Cost of Capital and Equity Beta

 
10.6 Using Comparable Companies to Estimate Betas

 
10.7 Adjusting Unlevered Betas for Excess Assets, Divestitures, And Mergers

 
10.8 Limitations of the Levering and Unlevering Formulas

 
Summary and Key Concepts

 
Additional Reading and References

 
Exercises and Problems

 
Solutions for Review Exercises

 
 
Chapter 11: Measuring the Weighted Average Cost of Capital and Related Valuation Issues
Introduction

 
11.1 The Weighted Average Cost of Capital—Overview

 
11.2 Measuring Target Capital Structures and the Income Tax Rate for Interest Tax Shields

 
11.3 The Effects of Treating Liabilities as Debt versus Operating Liabilities

 
11.4 Valuing a Company with Interest and Net Operating Loss Carryforwards

 
11.5 Other Factors That Affect the Value Created from Debt Financing

 
Summary and Key Concepts

 
Additional Reading and References

 
Appendix: Financial Statement and Free Cash Flow Effects of Leases

 
Exercises and Problems

 
Solutions for Review Exercises

 
 
Chapter 12: The Effects of Stock-Based Compensation and Other Equity-Linked Securities on Discounted Cash Flow Valuations
Introduction

 
12.1 Adjusting Discounted Cash Flow Valuations for the Expected Issuance of Future Stock-Based Compensation

 
12.2 Adjusting a Discounted Cash Flow Valuation for Previously Issued and Outstanding Equity-Linked Securities

 
12.3 Valuing Warrants, Employee Stock Options, and Other Option-Based Equity-Linked Securities

 
12.4 Measuring the Cost of Capital for Option-Based Equity- Linked Securities

 
12.5 Convertible Debt

 
Summary and Key Concepts

 
Additional Reading and References

 
Exercises and Problems

 
Solutions for Review Exercises

 
 
Chapter 13: Introduction to Market Multiple Valuation Methods
Introduction

 
13.1 The Market Multiple Valuation Process

 
13.2 Commonly Used Market Multiples

 
13.3 Risk and Growth Value Determinants of Market Multiples

 
13.4 Additional Factors to Consider When Assessing Comparability

 
13.5 The Process for Identifying Comparable Companies

 
13.6 Transitory Shocks and Market Multiples

 
13.7 Analyzing and Measuring Continuing Value Multiples

 
Summary and Key Concepts

 
Additional Reading and References

 
Exercises and Problems

 
Solutions for Review Exercises

 
 
Chapter 14: Market Multiple Measurement and Implementation
Introduction

 
14.1 First Principles for Measuring Market Multiples

 
14.2 Initial Financial Statement Review

 
14.3 Measuring Market Multiple “Numerators”

 
14.4 Basics of Measuring Market Multiple “Denominators”

 
14.5 Adjusting Market Multiple Inputs for Non-Recurring Items

 
14.6 Adjusting Market Multiple Inputs for Partially Owned Companies

 
14.7 Adjusting Market Multiple Inputs for Corporate Transactions

 
14.8 Comparison of Merck’s Market Multiples Based on Reported and Adjusted Inputs

 
14.9 Adjusting Market Multiple Inputs for Leases and Discontinued Operations

 
14.10 Selecting Among Alternative Market Multiples and Establishing a Range

 
Summary and Key Concepts

 
Additional Reading and References

 
Exercises and Problems

 
Solutions for Review Exercises

 
 
Chapter 15: Leveraged Buyout Transactions
Introduction

 
15.1 Leveraged Buyout Activity, Deal Characteristics, and the Role of the Financial Sponsor

 
15.2 Potential Motivations, Economic Forces, and Economic Research

 
15.3 Steps in Assessing the Investment Value of Leveraged Buyout Transactions

 
15.4 The John Edwardson & Company Leveraged Buyout Transaction

 
15.5 Using Discounted Cash Flow Valuation Models to Evaluate LBO Transactions (Steps 9 and 10)

 
Summary and Key Concepts

 
Additional Reading and References

 
Exercises and Problems

 
Solutions for Review Exercises

 
 
Chapter 16: Mergers and Acquisitions
Introduction

 
16.1 What Do We Know About Merger and Acquisition Transactions?

 
16.2 What Motivates Mergers and Acquisitions, and Do They Create Value?

 
16.3 Deal Structure, Income Taxes, and Other Contract Provisions

 
16.4 Synergies

 
16.5 Overview of How to Value Merger and Acquisition Transactions

 
16.6 Is the Merger and Acquisition Transaction Accretive or Dilutive?

 
16.7 Cash-Based Transactions—Negotiation Ranges and Allocation of Gains

 
16.8 Stock-Based Transactions—Negotiation Ranges and Allocation of Gains

 
16.9 The Xerox Corporation and Affiliated Computer Services, Inc. Merger

 
Summary and Key Concepts

 
Additional Reading and References

 
Exercises and Problems

 
Solutions for Review Exercises

 
 
Chapter 17: Valuing Businesses Across Borders
Introduction

 
17.1 How Cross-Border Valuations Are Different

 
17.2 Exchange Rate Basics

 
17.3 Exchange Rate Theories and Forecasting Methods

 
17.4 Overview of Potential Income and Other Tax Issues in a Cross-Border Setting

 
17.4 Measuring the Equity Cost of Capital

 
17.5 Cross-Border Valuation in Less Developed or Troubled Economies or Emerging Markets

 
17.6 Challenges Using Market and Transactions Multiples Across Borders

 
17.7 Exchange Rate Exposure and Hedging Basics

 
Summary and Key Concepts

 
Additional Reading and References

 
Exercises and Problems

 
Solutions for Review Exercises

 

Corporate Valuation: Theory, Evidence & Practice has been the industry standard on valuation for over two decades, well before it was widely available. The corporate valuation course based on this book is one of the few unstated requirements for graduates of The Wharton School that hope to enter into the field of finance. Having hired dozens of Wharton alumni who have learned valuation from this book, I cannot imagine a

more thorough guide or a better reference to learn valuation. - Ben Frost, Goldman Sachs 

Ben Frost
Goldman Sachs
This book contains everything one needs to know to properly value a company. It covers the financial theory of investment analysis, the accounting notions needed to understand, analyze, and forecast financial statements, and many techniques for creating a financial model yielding a rigorous estimate of firm value. It does all that while also providing readers with interesting anecdotes and detailed real-world examples. It is excellent both as the main text for a valuation course, and as the primary reference for practitioners on Wall Street. - Vincent Glode, Professor of Finance, The Wharton School, University of Pennsylvania
Vincent Glode
University of Pennsylvania
Key features

NEW TO THIS EDITION:

  • Completely Updated Data & Empirical Analyses: Every chapter reflects the latest financial markets, including updated industry beta estimates, risk premiums, cost of capital inputs, credit ratings, default data, private equity activity, and M&A deal trends throughout the book.
  • Coverage of the 2025 One Big Beautiful Bill Act (OBBBA)
    Integrated discussion of the OBBBA and changes from the 2017 Tax Cuts and Jobs Act (TCJA), and how they impact the tax deductibility of interest, the taxation of U.S. multinationals, and more. 
  • Latest Accounting Standards: Expanded treatment of lease accounting and other rule changes, with clear, worked examples showing how new standards affect financial analysis, free cash flows, and the cost of capital.
  • Streamlined Chapters with Stronger Explanations: Key chapters reorganized and enhanced based on student feedback, such as the cost of debt, cross-border valuation, and international applications, with more examples and clearer guidance.
  • More Real Companies, More Hands-On Practice: New and expanded examples featuring firms like Apple, Amazon, Tesla, Home Depot, Lumen, and Mattel, plus additional end-of-chapter problems that sharpen real-world valuation skills.
KEY FEATURES:
  •  Integration of Accounting and Finance: Unlike traditional finance texts, the book explicitly integrates accounting detail with valuation theory, helping students understand not only what models to use, but how the underlying financial statements drive valuation outcomes, which is a critical skill for workplace success.
  •  Step-by-Step, Practice-Driven Valuation Frameworks: Valuation concepts are taught through clear, sequential processes so students can confidently implement valuation methods.
  •  Comprehensive yet Flexible Structure: From a 5-day course to a 15-week semester, the modular six-part organization allows instructors to tailor coverage, omitting or emphasizing technical depth as appropriate, while still maintaining a coherent valuation narrative from fundamentals to advanced applications.
  •  Real-World Data and Applied Examples Throughout: Every chapter incorporates real companies, SEC filings, and transaction data, supported by detailed “Valuation in Practice” examples that bridge theory and decision-making in contexts such as M&A, leveraged buyouts, and cross-border valuation.
  •  Strong Pedagogical Support for Skill Development: Valuation Keys, in-chapter review exercises with solutions, and end-of-chapter problems reinforce learning and support students with limited prior exposure, making complex valuation concepts accessible without oversimplifying them.