Market value, analysis

The degree of sophistication of such an analysis can vary all the way from a simple guesstimate of the relative merits of the competing materials to a statistical value analysis using multiple regressions. Such a procedure has been described in detail by S. T. Penderfi). Even the so-called panel of experts approach may be useful. A word of caution here—just as in the field research, the market researcher must avoid becoming a mere collector of data and opinions. 

Good communication with the investment community is essential for a company that wishes to increase its market value. Our analysis of a sample of German companies found a significant correlation between the quality of investor relations (judged by the quahty of annual reports, analyst conferences and other investor events) and shareholder returns. The sample covered a broad spread of industries and included several chemical companies. 

Cross-industry studies provide similar results. For example, a recent analysis presented in the CFO magazine indicates that changes in Economic Value Added (the measure that has been associated with shareholder value) explain only 35 percent of changes in market value. Another study at New York University s Stern School of Business indicates that Intangibles drive up to 75 percent of market value. 

Our analysis of actual nonfinancial performance as correlated with market value revealed the following value drivers Innovation, Quality, Customer, Management, Alliances, Technology, Brand, Employee, Environment. Multiple, statistically independent measures are used as inputs for each driver in order to ensure a robust model. 

Analysis at market value To make a social cost benefit analysis of the addition of gasification to a corn mill the investment costs have to be on annual basis. We assume that the investments are financed by the government and are repaid by the Ujamaa community in five years including an interest of 10%, in equal installments (annuity of 0.26). 

Data calculation is likewise a component of an inventory analysis. The question of allocation is here especially of importance. An aUocatiOTi should always be carried out when dealing with systems involving multiple products (e.g. electricity and steam as by-products from a power plant). It is then important to define a key to allocate the environmental burdens of the production to the individual product, since in a specific case we require only the data of e.g. electricity production, but have to exclude the share which is linked to the steam production. This requirement of carrying out an allocation of the environmental burdens also applies for recycling. The most appropriate allocation key is typically the market value of the co-products, but e.g. the energy content and others are also in use, depending on the specific situation. 

As a result of such accounting/marketing dialogues, methods to reduce the profit squeeze and to improve distribution effectiveness could be started. Many techniques previously noted such as value analysis, PERT, and operations research could be applied to the factors known and programmed through the computer for various decision design tables and profit information analysis. 

One additional application of MV analysis is to use the technique to reengineer implied market returns. This requires the problem be reformulated to select a set of returns given asset weights, risk, and correlations. The weights are derived from current market capitalizations for equities, bonds, and other assets. The presumption is that today s market values reflect the collective portfolio optimizations of all investors. Thus, the set of returns that minimizes risk is the market s forecast of future expected returns. This information can be compared with the user s own views as a reliability check. If the user s views differ significantly, they may need to be modified. Otherwise the user can establish the portfolio positions reflecting his or her outlook under the premise his or her forecasts are superior. 

With a market interest rate of 15% and a general inflation rate of 5%, the inflation-free rate is 9.52%. This leads to a net present value of 63,480.63, which is equivalent to the actual doUar analysis (within rounding error). This is expected because all of the component cash flows were inflated at the same rate. As noted in the before-tax analysis, if the component inflation rates differ, then there may be a discrepancy in the final net present value analysis because the conversion from a market rate to an inflation-free rate (or vice versa) requires a single inflation rate. 

Even so, it is valuable to understand the relative position of individual products in the overall structure of the adhesive and sealant market. Table 1 below provides a good breakdown of elastomeric products in comparison with other major product types. Only the market value of these products is shown, even though most studies, including the one referenced here, include volume data as well. More complete analysis is available from Impact Marketing Consultants, Manchester Center, VT, publisher of the 2000-2002 Rauch Guide to the US Adhesives Sealants Industry (see Chap. 2 on Information Resources). 

Making comparison between bonds could be difficult and several aspects must be considered. One of these is the bond s maturity. For instance, we know that the yield for a bond that matures in 10 years is not the same compared to the one that matures in 30 years. Therefore, it is important to have a reference yield curve and smooth that for comparison purposes. However, there are other features that affect the bond s comparison such as coupon size and structure, liquidity, embedded options and others. These other features increase the curve fitting and the bond s comparison analysis. In this case, the swap curve represents an objective tool to understand the richness and cheapness in bond market. According to O Kane and Sen (2005), the asset-swap spread is calculated as the difference between the bond s value on the par swap curve and the bond s market value, divided by the sensitivity of 1 bp over the par swap. 

A value analysis should be made, to determine how much of the product, or which sections of it, can effectively be recovered. As noted already, the decision may not be wholly on economic groimds. Other non-market factors, such as legislation and image/good-will may also have to be considered. Overall, however, is the fact that, almost irrespective of the value of the materials recovered, the time and therefore the cost of dismantling will usually be disproportionate. Consideration should be given to incinerate rather than recycle when certain materials provide no benefit to the environment particularly cost wise. 

Associated with duration is the concept of dollar duration. Dollar duration is invaluable for portfolio managers when analysing the concentration of the portfolio in different buckets adjusted for duration. Mathematically, it is the product of the dollar value of the bond and its duration. For the purpose of portfolio analysis duration contribution (the product of duration and market value percentage) is used. Exhibit 26.3 shows the concentration of a portfolio in duration contribution terms. 

After assessing a bond with the help of credit analysis, the question arises to what extent the market price of this bond corresponds with the investor s judgement. The market price should compensate the investor for all risks connected with holding the bond. This market price (spread) is often referred to as the return differential between the analysed bond and the benchmark. Frequently, government bonds or the swap rate with matching maturities are used as benchmarks. Another standard reference are bonds of other issuers that are active in the same business field. Since one debt instrument is assessed relative to another debt instrument, this analysis is also called relative value analysis, the basic principles of which are described in this section. 

---