Corporate Valuation: Looking Beyond the Forecast Period Through New “Fuzzy Lenses”

Abstract

Novel suggestions and insights on corporate valuation are provided adopting a still unconventional approach: fuzzy logic. It recalls the (Sophist) concepts of imprecision, vagueness, and ambiguity, overcoming the common (Aristotelian/Boolean) logic founded on dichotomy. Fuzziness has been applied to economics and appears, for most part in cognitive contexts characterized by uncertainty and complexity, growingly adequate to business and information sciences. In this paper, our goal is to revisit and expose the future horizon value attributable to a business after n years (in the medium and long term, beyond the normal five-to-ten-year forecast period) through a fuzzy multivalent number, rather than a limiting crisp (single-valued) one. Since the “continuing” or “terminal” value is a big slice of the overall corporate value, such “picture” results in an amusing and suggestive (impressionistic) visualization, as financial numbers are looked through deconstructing and zooming lens. Abductively, absolute conclusions on business values are precluded, but several levels of feasibility or adequacy are possible, showing a blurry multiplicity of gathered numbers. The fuzzy approach enlarges the extent of the sensitivity analysis made by the expert (appraiser) and enables the decision makers (administration) having for processes or predictions more information with characteristics of completeness, transparency, and credibility. Finally, the approach sheds light on different value possibilities rather than sharply estimating and releasing only one single (most likely) value.