13
Depreciation and amortization are tools to spread the expense of an investment over its useful life.
Depreciation is for expensing tangible assets and amortization is for intangible assets. They are functionally the
same but in some cases have different implications for tax purposes.
14
Financial Accounting Standards Board, “Statement of Financial Accounting Standards No. 141 (Revised
2007): Business Combinations,” No. 299-A, December 2007.
15
Koller, Goedhart, and Wessels, Valuation, 216-218.
16
Fred R. Bleakley, “Clinton Budget Would End Tax Cut for 100-Year Bonds,” Wall Street Journal, February 4,
1997.
17
Katharine Adame, Jennifer Koski, Katie Lem, and Sarah McVay, “Free Cash Flow Disclosure in Earnings
Announcements,” Working Paper, June 3, 2020.
18
Jerald E. Pinto, Thomas R. Robinson, and John D. Stowe, “Equity Valuation: A Survey of Professional
Practice,” Financial Economics, Vol. 37, No. 2, April 2019, 219-233.
19
Michael J. Mauboussin and Dan Callahan, “Categorizing for Clarity: Cash Flow Statement Adjustments to
Improve Insight,” Consilient Observer: Counterpoint Global Insights, October 6, 2021.
20
David Solomons, Divisional Performance: Measurement and Control (New York: Financial Executives
Research Foundation, 1965), 60-71.
21
G. Bennett Stewart, The Quest for Value: A Guide for Senior Managers (New York: HarperCollins Publishers,
1991).
22
Vartika Gupta, Tim Koller, and Peter Stumpner, “Which Metrics Really Drive Total Returns to Shareholders?”
McKinsey & Company, October 2021.
23
Marshall Fisher, Vishal Gaur, and Herb Kleinberger, “Curing the Addiction to Growth,” Harvard Business
Review, Vol. 95, No. 1, January-February 2017, 66-74.
24
Aswath Damodaran, “Dealing with Cash, Cross Holdings and Other Non-Operating Assets: Approaches and
Implications,” New York University – Stern School of Business, September 30, 2005.
25
Tim Opler, Lee Pinkowitz, René Stulz, and Rohan Williamson, “The Determinants and Implications of
Corporate Cash Holdings,” Journal of Financial Economics, Vol. 52, No. 1, April 1999, 3-46; Richard Passov,
“How Much Cash Does Your Company Need?” Harvard Business Review, Vol. 81, No. 11, November 2003,
119-126; and Thomas W. Bates, Kathleen M. Kahle and René M. Stulz, “Why Do U.S. Firms Hold So Much
More Cash than They Used To?” Journal of Finance, Vol. 64, No. 5, October 2009, 1985-2021.
26
Thomas W. Bates, Ching-Hung Chang, and Jianxin Daniel Chi, “Why Has the Value of Cash Increased Over
Time?” Journal of Financial and Quantitative Analysis, Vol. 53, No. 2, April 2018, 749-787.
27
Amy Dittmar and Jan Mahrt-Smith, “Corporate Governance and the Value of Cash Holdings,” Journal of
Financial Economics, Vol. 83, No. 3, March 2007, 599-634.
28
Amy Dittmar, Jan Mahrt-Smith and Henri Servaes, “International Corporate Governance and Corporate Cash
Holdings,” Journal of Financial and Quantitative Analysis, Vol. 38, No. 1, March 2003, 111-133.
29
Koller, Goedhart, and Wessels, Valuation, 338.
30
James L. Canessa and Gregg A. Jarrell, “The Proper Treatment of Cash Holdings in DCF Valuation Theory
and Practice,” Journal of Business Valuation and Economic Loss Analysis, forthcoming.
31
Ethan Rouen, Eric C. So, and Charles C.Y. Wang, “Core Earnings: New Data and Evidence,” Journal of
Financial Economics, Vol. 142, No. 3, December 2021, 1068-1091.
32
For a good chapter on this topic, see Koller, Goedhart, and Wessels, Valuation, 427-442.
33
“Kimberly-Clark Announces Year-End 2021 Results And 2022 Outlook,” January 26, 2022. See
www.news.kimberly-clark.com/2022-01-26-KIMBERLY-CLARK-ANNOUNCES-YEAR-END-2021-RESULTS-
AND-2022-OUTLOOK.
34
Bikki Jaggi, Beixin Lin, Suresh Govindaraj, and Picheng Lee, “The Value Relevance of Corporate
Restructuring Charges,” Review of Quantitative Finance and Accounting, Vol. 32, No. 2, February 2009, 101-
128.
35
Here’s the calculation: We take $560 million, multiply it by the complement of the assumed tax rate of 25
percent (.75 = 1 - .25), and capitalize it by the cost of capital of 6 percent. So, $420 million/.06 = $7,000 million.
36
Venkat Ramana Reddy Peddireddy, “Estimating Maintenance CapEx,” Columbia University PhD Thesis,
2021.