PRICE AND VALUATION
A way to determine the actual price of a company and the associated common stock
by
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No survey instrument, preexisting or created, was used because the data were publicly available and were inanimate financial figures. The variables, however, require further discussion. It was assumed for the study that corporate profits were important to the firm’s management and to shareholders according to the philosophy within the SWM model, which contained the notion that “the firm should strive to maximize the return to shareholders” (Eiteman et al., 2007, p. 4). Market value and book value were important to corporate pricing issues because a market price that was lower than the firm’s book price was assumed to indicate an underpriced security that was appropriate for inclusion in an investment portfolio to earn greater profits for shareholders (Bodie, Kane, & Marcus, 2005, p. 291; Shim et al., 1994, p. 150). Johnstone (2007) noted that the use of the CAPM was not always appropriate because that use only addressed certain cases of pricing, due to unadjusted currency, because the units of currency varied significantly between ex ante and ex post valuation (p. 159). A similar observation was noted elsewhere in the literature concerning the use of traditional pricing techniques (Grauer, 2008, p. 150), and in certain circumstances regarding equity pricing, the “price to book value is the best standalone price multiple” (Sehgal & Pandey, 2010, p. 68). To expand upon finance theory, regarding the pricing of financial instruments from domestic companies, the study was a variation of and expansion upon the three-factor, Fama-French, multiple regression technique already in accepted use (Mirza & Afzal, 2011, p. 173).
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About the Book
This book is my doctoral dissertation. It has been published here because many people have the desire to read an old-fashioned book and enjoy turning the pages to digest the information at a comfortable rate. The original idea for this study, as many of my graduate students already know, came from a lecture by a previous graduate school professor of mine. His parable concerned a famous baseball coach who was really hungry after a baseball game and decided, because he was more hungry than usual, to slice the post-game pizza into eight slices instead of just four. If you understand why that is funny, then you have a good head start on the road to understanding the concept of true valuation. In the Field of Economics, concerning the long-term, price is the ultimate arbiter. When we couple price with non-traditional, relative valuation, whether it's pizza, a corporate entity for purchase for billions of dollars, or just the price of one share of stock, we get a better understanding of what something is actually worth. Therefore, we understand very quickly whether or not we are getting a "good deal" for the price paid. If you are not a rocket-scientist, but want a step-by-step and thorough understanding of what things are really worth - this book is for you.
About the Author
Dr. Jewczyn grew up as a farm kid in upstate New York and, after a stint as a radio D.J., served six years in the U.S. Navy as a Navy Corpsman and Pharmacist's Mate (running the busiest military pharmacy on earth). He completed his baccalaureate degree in 16 months, using the Montgomery G.I. Bill. He earned the degree while working full-time on active duty. After a stint in the Navy's Sixth Fleet (Admiral's Staff) on an aircraft carrier as the Pharmacy representative to a Rapid Deployment Surgical Team (the first "normalization cruise" after the Beirut bombing in 1983 - a diplomatic mission), Dr. Jewczyn completed his Navy tour and became an insurance agent and a securities registered representative for the wealthiest company on earth. For over 20 years, Dr. Jewczyn worked in or around the finance industry as a business owner, factor, business consultant, financial advisor, and federal judge for the securities industry, to make sure that investors received good value and that institutions grew with good business practices. As a student, Dr. Jewczyn has enrolled for and taken over 400 semester hours of college classes and as an instructor he has served as a department chair, course architect, and a curriculum developer - he has taught over two-dozen college classes in accounting, business, economics, and finance. His Master of Business Administration/Finance (with Distinction) and Doctor of Philosophy with a specialization in Financial Economics (Honors Graduate) degrees and his considerable practitioner experience in the real world have prepared him to write extraordinary texts and international academic journal research articles in economics and finance. He lives with his family in San Diego, CA and serves as a Professor of Finance at a major university (70,000+ students). His hobbies include kayaking in Mission Bay, lap swimming, SCUBA, real-time computer strategy war-gaming, and jogging on the beaches at Coronado Island.