Document Type

Peer-Reviewed Article

Publication Date

Winter 2013


A noncontrolling interest (NCI) arises when a firm fully consolidates subsidiaries that are not wholly owned by the parent. The existence of a noncontrolling interest complicates financial analysis and valuation. Failure to appropriately consider the NCI may lead to errors in equity valuation and share price since the NCI impacts equity value and implied share price of the parent firm. Return on equity calculations must be carefully constructed as there are several net income and equity values reported. Finally, the NCI can impact the weighted average cost of capital. Verizon Communications was selected as a case study based on the large noncontrolling stake of Vodafone in Verizon Wireless. This teaching note could be used in undergraduate and graduate level finance courses on financial analysis, investments, valuation or intermediate corporate finance.



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