What Is A Name Worth?

For many companies, the brand name may be one of the most important assets. According to Interbrand, a leader in the valuation of brand names, the Apple brand is worth about $98 billion and Google's brand is worth about $93 billion. If you look at the methodology, you will see the financial analysis Interbrand uses for the valuation. The valuation method is economic profit, or economic value added (EVA), which was popularized by Stern-Stewart. Economic profit is the aftertax operating profit of the company minus a charge for the capital used. When discounting the projected aftertax operating profit, Interbrand references the industry WACC. You should note that the brand valuation is not just the name, but closer to the company value. Would you really buy the Apple name for $98 billion without the ability to sell iPhones, iPads, and iTunes? Probably not. One last question: Does the economic profit concept look familiar to you? We would hope so since it is basically an NPV analysis of the company as a whole, not just the NPV of an individual project.