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Valuation of an Equity Interest

Author

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  • Lawrence D. Schall

    (Foster School of Business, Box 353226, University of Washington, Seattle, Washington 98195-0001, USA)

Abstract

The equity cash flow approach to valuing an equity interest is intuitive, rigorous, and practical, and is easily implemented using historical and forecasted statements of cash flows. This method is compared with popular alternatives. The equity cash flow equation for valuing equity is derived taking into account employee compensation expense in the form of equity participation (stock options and stock grants). This is of particular interest in light of the importance of options and grants as a form of compensation.

Suggested Citation

  • Lawrence D. Schall, 2015. "Valuation of an Equity Interest," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 18(04), pages 1-25, December.
    • Handle: RePEc:wsi:rpbfmp:v:18:y:2015:i:04:n:s0219091515500216
    DOI: 10.1142/S0219091515500216
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    References listed on IDEAS

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