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Valuing Companies by Cash Flow Discounting : Only APV Does Not Require Iteration
Fernandez, Pablo - 2020
The most used methods for valuing companies by Cash Flow Discounting are equity cash flow, free cash flow, capital cash flow and APV (Adjusted Present Value). Only APV does not require iteration All four methods, if properly applied, always give the same value. This result is logical, as all the...
Persistent link: https://www.econbiz.de/10012824556
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The Usefulness of Accrual Accounting in Forming Analysts’ Forecasts of Accruals and Cash Flows from Operations
Sankaraguruswamy, Srinivasan - 2020
Recent work shows that the role of accrual accounting in mitigating the timing differences between cash flows and operating performance has been disappearing over time (Bushman, Lerman, and Zhang 2016). We argue that even though there is noise in the accrual accounting process, sophisticated...
Persistent link: https://www.econbiz.de/10012826688
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Cash Flows in Perpetuity with Different Growth Rates for the FCF and the Debt : A Numerical Illustration
Tham, Joseph - 2019
In this note, we present a simple numerical example to illustrate the case where the growth rate for the Free Cash Flow (FCF) gU is greater than but different from the growth rate for the Cash Flow to Debt (CFD) gD. Here we assume that the value of the appropriate discount rate for the tax...
Persistent link: https://www.econbiz.de/10012869300
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Two Fundamental Principles for Cash Flow Valuation (CFV)
Tham, Joseph - 2019
In this note, we discuss two fundamental principles for Cash Flow Valuation (CFV). We hope that adherence to these two principles will improve the practice of CFV. These principles are general, relatively uncontroversial, and should be acceptable as starting points for cash flow valuation....
Persistent link: https://www.econbiz.de/10012871063
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Optimal Capital Structure (OCS) with a Finite Cash Flow : A Simple Numerical Illustration
Tham, Joseph - 2019
In this note, we present a simple numerical example, with a finite cash flow, to illustrate the concept of the Optimal Capital Structure (OCS). First, we assume that the discount rate for the tax benefits K<sub>TB</sub> equals the return to unlevered equity K<sub>U</sub>. The cost of debt K<sub>D</sub> is a simple linear...
Persistent link: https://www.econbiz.de/10012871362
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Risk Price Dynamics
Borovička, Jaroslav - 2019
shock on future cash-flow growth. The elasticities are designed to accommodate nonlinearities in the stochastic evolution …
Persistent link: https://www.econbiz.de/10012871777
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A Matter of Principle : Accounting Reports Convey Both Cash-Flow News and Discount-Rate News
Penman, Stephen H. - 2017
convey both cash-flow news and discount-rate (expected-return) news. The paper points to the realization principle … expected-return news predicts future returns while cash-flow news does not. The analysis yields a number of additional insights … versus cash flows, cash flows largely convey expected-return news rather than cash-flow news. In sum, the paper shows that …
Persistent link: https://www.econbiz.de/10012973434
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Firm Valuation : Tax Shields & Discount Rates
Ansay, Thomas - 2017
This paper proposes a new discounted cash flows' valuation setup, and derives a general expression for the tax shields' discount rate. This setup applies to any debt policy and any cash flow pattern. It only requires the equality at any time between the assets side and the liabilities side of...
Persistent link: https://www.econbiz.de/10012976531
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Cash Flow News, Discount Rate News, and Momentum
Celiker, Umut - 2016
We examine the effect of aggregate cash flow news and discount rate news on momentum returns. We find that momentum profits are higher following aggregate positive cash flow news, even in down markets or low sentiment periods. This finding expands on the evidence in Cooper et al. (2004) that...
Persistent link: https://www.econbiz.de/10012979702
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Stochastic Idiosyncratic Cash Flow Risk and Real Options : Implications for Stock Returns
Bhamra, Harjoat Singh - 2016
Stocks with high idiosyncratic volatility perform poorly relative to low idiosyncratic volatility stocks. We offer a novel explanation of this anomaly based on real options, which is consistent with earlier findings on idiosyncratic volatility (the positive contemporaneous relation between...
Persistent link: https://www.econbiz.de/10013007739