CHAPTER 5

Case Studies in Valuation During the Recent Decade

At the end of Chapter 4, we demonstrated a practical application of the valuation model. We did so under practice field conditions, meaning that we applied the model to clean data under controlled conditions. The next logical step is applying the model under competitive match conditions; doing this often means dirty or unusual data, time pressure, and other extraneous factors.

Consequently, in this chapter, we examine four companies over the past decade, 1995 to 2005, with a view toward understanding the complexities that arise under real-life conditions. The purpose is to demonstrate both strengths and weaknesses in our analytical construct.

As a matter of course, any sufficiently powerful model must rely on a high degree of abstraction and idealized representation. In a profound sense, this strength also embodies the fundamental weakness, that is, the problematic application in certain stress or unusual cases. We have therefore selected companies both to demonstrate the general resilience of the model and to propose certain commonsense adjustments for atypical or ill-behaved cases.

At the end of the day, we are well advised to keep in mind our goal of being “approximately right” rather than “precisely wrong.” Thus, we will not be excessively discouraged where we occasionally and inevitably find instances that prove intractable. While we could presumably simply create additional explanatory aspects of the model to turn ...

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