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Estimates Of The Sensitivities Of The Value Of The Firm To Profitability, Growth, And Capital Intensity, Tom W. Miller, Richard E. Mathisen, John P. Mcallister
Estimates Of The Sensitivities Of The Value Of The Firm To Profitability, Growth, And Capital Intensity, Tom W. Miller, Richard E. Mathisen, John P. Mcallister
Faculty Articles
Value-based management systems concentrate on actions that generate value for the shareholders in the wealth creation process (Fisher 1995; Lieber 1996; Walbert 1994). This study focuses explicitly on profitability, growth, and capital intensity as drivers of the value of the firm by extending a free cash flow valuation model for the firm. The extended model is used to provide information about the sensitivities of the value of the firm to changes in the firm's profitability, growth, and capital intensity. These sensitivities are presented in terms of partial derivatives and dollar changes. The partial derivatives show the changes in the value …