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DCF Valuation of Nonprofit Universities

Author

Listed:
  • Yan He
  • Frank Long

Abstract

We conduct the Discounted Cash Flow (DCF) valuation of two nonprofit organizations- Syracuse University and Indiana University. We transform nonprofits to for-profits by converting nonprofit social benefit to net earnings and by adopting for-profit cost of equity and tax rate. These adjustments attempt to capture considerable hidden value to equityholders. We find that in the best scenario, the net worth (market value of equity) could be about 2 times the book equity for both universities in June 2017.

Suggested Citation

  • Yan He & Frank Long, 2020. "DCF Valuation of Nonprofit Universities," Applied Finance and Accounting, Redfame publishing, vol. 6(1), pages 1-8, February.
    • Handle: RePEc:rfa:afajnl:v:6:y:2020:i:1:p:1-8
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    References listed on IDEAS

    as
    1. Manuel Adelino & Katharina Lewellen & Anant Sundaram, 2015. "Investment Decisions of Nonprofit Firms: Evidence from Hospitals," Journal of Finance, American Finance Association, vol. 70(4), pages 1583-1628, August.
    2. Kalodimos, Jonathan, 2017. "Internal governance and performance: Evidence from when external discipline is weak," Journal of Corporate Finance, Elsevier, vol. 43(C), pages 193-216.
    3. Paul Gertler & Jennifer Kuan, 2009. "Does It Matter Who Your Buyer Is? The Role of Nonprofit Mission in the Market for Corporate Control of Hospitals," Journal of Law and Economics, University of Chicago Press, vol. 52(2), pages 295-306, May.
    4. Siti Nuryanah & Sardar M. N. Islam, 2015. "Corporate Governance and Financial Management," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-137-43561-3, December.
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    Cited by:

    1. Universidad Nacional de Mar del Plata, 2022. "Emprendimientos 4.0: desafíos actuales y futuros. Resultados de investigación y prácticas docentes," Nülan. Deposited Documents 3933, Universidad Nacional de Mar del Plata, Facultad de Ciencias Económicas y Sociales, Centro de Documentación.

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    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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