A Pragmatic Look at Valuation (Collection)

1. Introduction

1.1 Introduction

Every day, businesses face decision choices. For example, should a bank choose to expand organically by opening new branches, or should it expand by acquiring another bank with its own network of branches. Or, should a technology company release a new version of a product line now, and thereby cannibalize sales of its existing product line, or should it wait a year at the risk of giving its competitors time to catch up. The key to success in business is to make sound, or value-creating, business decisions. Every choice a business manager can potentially make has risk associated with it.¹ In turn, every choice also has some upside, or positive return, associated with it. A sound decision is one that balances this ...