1	Knowledge Capital Valuation © Copyright 1978-2007 Ben Livson, BAL Consulting P/L™. All rights reserved.
2	Lord Kelvin, Popular Lectures and Addresses, 1891-94 When you can measure what you are speaking about, and express it in numbers, you know something about it: but when you cannot express it in numbers, your knowledge is of a meagre and unsatisfactory kind: it may be the beginning of knowledge, but you have scarcely, in your thoughts, advanced to the stage of science.
3	We drown in information but crave for knowledge Human Capital: Competencies, Attitude … Structural Capital Policies, Procedures and Processes Corporate Databases Content Intellectual Property: Patents, Licenses … Customer Capital Marketing, Sales and Delivery Channels Customer Relationship Partnerships and Alliances
4	Knowledge Capital in the US
5	Basics: ROI, NPV & IRR
6	Key Equations for EVA Economic Value-Added (EVA) = Accounting Profit – Cost of Shareholder Capital
7	Information Productivity (EVA/Information Mgmt)
8	Calculate Information Productivity
9	How to Calculate Public Sector Information Productivity
10	Alinean – Strassmann ROI Model
11	ValueIT™ - The CIO Survival Kit
12	Crisis in Company Valuation Book Value Accounting still based on Luca Pacioli’s 1494 Summa de Arithmetica, Geometrica, Proportioni et Proportionalita treatise on double-entry bookkeeping also known as the Italian Method.
13	Knowledge Valuation Methods
14	Knowledge Capital Views $People Brand Advantage $Process Strategic Advantage $Content Organizational Advantage $Brand Mapping of Intangibles $Alliances Competitive Advantage $Customers Risk Reduction $IP Intellectual Property
15	Bell-Mason Dimensions and Stages
16	Bell_Mason Stages of Growth
17	Baruch Lev’s KC Valuation Knowledge Capital = (Normalized earnings - earnings from tangible and financial assets)/(Knowledge capital discount rate) Strengths: Valuation is forward looking. It has some predictive capability. Weaknesses: Requires more effort to apply.
18	MV, Strassmann & Tobin Intellectual Capital = Market Value (Price/Share x # of shares) - Book Value (Equity - Debt) Strassmann’s Knowledge Capital = (Profits - Financial Capital "Rental")/(interest rate cost of long term debt) Tobin’s Q = Market Value/Replacement Cost
19	Calculated Intangible Value Calculate average pre-tax earnings for three years Calculate average year-end tangible assets for 3 years Divide earnings by assets --> company average ROA for 3 years Find industry average ROA Multiply industry ROA by company's tangible assets. Subtract product from company's pre-tax earnings. --> Excess return. Calculate 3 year average tax rate. Multiply by excess return Subtract from excess return --> premium attributable to intangible assets. Calculate Net Present Value of Premium. Divide premium by discount rate. (i.e., cost of capital)
20	Ben Livson’s KC Equation MC=Market Capital, KC=Knowledge Capital, BV=Book Value & CV=Comprehensive Value and PV=Perception Value in market perception CV=BV+KC MC=CV+PV=BV+KC+PV Nokia 2000: MC=$160b=$6b+$94b+$60b High PV=>Overvalued; Low PV => Undervalued Best Stock: Low PV and High KC !