A Monte Carlo Comparison between the Free Cash Flow and Discounted Cash Flow Approaches

One of the debates in the capital budgeting model selection is between the free cash flow and DCF methods. In this paper an attempt is made to compare SVA against NPV model based on Monte Carlo simulations. Accordingly, NPV is found less sensitive to value driver variations and has got higher forecast errors as compared to SVA model.

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Year of publication:	2002-08-20
Authors:	Akalu, Mehari Mekonnen ; Turner, Rodney
Institutions:	Tinbergen Instituut
Subject:	Capital budgeting \| Investment appraisal \| DCF methods \| Project Analysis \| Shareholder Value Analysis \| Value Management Techniques

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Extent:	application/pdf
Series:	Tinbergen Institute Discussion Papers.
Type of publication:	Book / Working Paper
Notes:	The text is part of a series Tinbergen Institute Discussion Papers Number 02-083/1
Classification:	G30 - Corporate Finance and Governance. General ; G31 - Capital Budgeting; Investment Policy ; L6 - Industry Studies: Manufacturing ; L8 - Industry Studies: Services ; L9 - Industry Studies: Transportation and Utilities ; M10 - Business Administration. General ; O22 - Project Analysis ; O32 - Management of Technological Innovation and R&D
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10011257488