SUBJECT AREAS: Capital budgeting, Cash flow, ERP, Forecasting, Investments, Present valueCASE SETTINGS: Italy; Appliance industry; 1999This case presents a capital budgeting problem. Whirlpool Europe is evaluating an investment in an enterprise resource planning (ERP) system that would...

SUBJECT AREAS: Biotechnology, Decision trees, Equity financing, Ramp;D, ValuationCASE SETTINGS: Sunnyvale, CA; Pharmaceutical industry; $1.3 million revenues; 2000Pharmacyclics (NASDAQ: PCYC), a pharmaceutical company that manufactures products that will improve existing therapeutic treatments for...

This paper presents the Capital Cash Flow method for valuing risky cash flows. I show that the Capital Cash Flow method is equivalent to discounting Free Cash Flows by the weighted average cost of capital. Because the interest tax shields are included in the cash flows, the Capital Cash Flow...

This study compares the market value of firms that reorganize in bankruptcy with estimates of value based on management's published cash flow projections. We estimate firm values using models that have been shown in other contexts to generate relatively precise estimates of value. We find that...

This paper compares the market value of highly leveraged transactions (HLTs) to the discounted value of their corresponding cash flow forecasts. These forecasts are provided by management to investors and shareholders in 51 HLTs completed between 1983 and 1989. Our estimates of discounted cash...

Research in behavioral corporate finance takes two distinct approaches. The first emphasizes that investors are less than fully rational. It views managerial financing and investment decisions as rational responses to securities market mispricing. The second approach emphasizes that managers are...

This paper compares the market value of highly leveraged transactions (HLTs) to the discounted value of their corresponding cash flow forecasts. These forecasts are provided by management to investors and shareholders in 51 HLTs completed between 1983 and 1989. Our estimates of discounted cash...

This paper develops a rule for calculating a discount rate to value risky projects. The rule assumes that asset risk can be measured by a single index (e.g., beta), but makes no other assumptions about specific forms of the asset pricing model. It treats all projects as combinations of two...