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McKINSEY & COMPANY is a management consulting firm that helps leading corporations and organizations make distinctive, lasting, and substantial improvements in their performance. Over the past seven decades, the firm's primary objective has remained constant: to serve as an organization's most trusted external advisor on critical issues facing senior management. With consultants deployed from over eighty offices in more than forty countries, McKinsey advises companies on strategic, operational, organizational, financial, and technological issues. The firm has extensive experience in all major industry sectors and primary functional areas, as well as in-depth expertise in high-priority areas for today's business leaders.

Tim Koller is a partner in McKinsey's New York office. Tim has served clients in North America and Europe on corporate strategy and issues concerning capital markets, M&A transactions, and value-based management. He leads the firm's research activities in valuation and capital markets issues. He received his MBA from the University of Chicago.

Marc Goedhart is an associate principal in McKinsey's Amsterdam office. Marc has served clients across Europe on portfolio restructuring, issues concerning capital markets, and M&A transactions. He received a PhD in finance from Erasmus University Rotterdam.

David Wessels is an adjunct Professor of Finance and director of executive education at the Wharton School of the University of Pennsylvania. Named by BusinessWeek as one of America's top business school instructors, he teaches corporate valuation at the MBA and Executive MBA levels. David received his PhD from the University of California at Los Angeles.

Part One: Foundations of Value.

1. Why Maximize Value?

2. The Value Manager.

3. Fundamental Principles of Value Creation.

4. Do Fundamentals Really Drive the Stock Market?

Part Two: Core Valuation Techniques.

5. Frameworks for Valuation.

6. Thinking about Return on Invested Capital and Growth.

7. Analyzing Historical Performance.

8. Forecasting Performance.

9. Estimating Continuing Value.

10. Estimating the Cost of Capital.

11. Calculating and Interpreting Results.

12. Using Multiples for Valuation.

Part Three: Making Value Happen.

13. Performance Measurement.

14. Performance Management.

15. Creating Value through Mergers and Acquisitions.

16. Creating Value through Divestitures.

17. Capital Structure.

18. Investor Communications.

Part Four: Advanced Valuation Issues.

19. Valuing Multibusiness Companies.

20. Valuing Flexibility.

21. Cross-Border Valuation.

22. Valuation in Emerging Markets.

23. Valuing High-Growth Companies.

24. Valuing Cyclical Companies.

25. Valuing Financial Institutions.

Appendix A: Economic Profit and the Key Value Driver Formula.

Appendix B: Discounted Economic Profit Equals Discounted Free Cash Flow.

Appendix C: Adjusted Present Value Equals Discounted Free Cash Flow.

Appendix D: Levering and Unlevering the Cost of Equity.

Appendix E: Leverage and the Price-Earnings Multiple.

Index.