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1
Grabowski, Roger J. "Comparing Growth Rates Used in Discounted Cash Flow Valuations." Business Valuation Review 40, no. 1 (January 1, 2021): 2–12. http://dx.doi.org/10.5791/20-00007.1.
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Estimating growth in net cash flows is one of the key components in applying the discounted cash flow (DCF) method in valuing any company, reporting unit, or other business unit. This paper explains the underlying assumptions of the DCF method and demonstrates how to compare the most commonly used basis for estimating net cash flows (sometimes referred to as free cash flows), expected organic growth, to historic estimates of growth of the subject company and estimates of earning growth commonly prepared by security analysts.
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Ivanovski, Zoran, Zoran Narasanov, and Nadica Ivanovska. "Performance Evaluation of Stocks’ Valuation Models at MSE." Economic and Regional Studies / Studia Ekonomiczne i Regionalne 11, no. 2 (June 1, 2018): 7–23. http://dx.doi.org/10.2478/ers-2018-0011.
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Abstract Subject and purpose of work: The main task of this paper is to examine the proximity of valuations generated by different valuation models to stock prices in order to investigate their reliability at Macedonian Stock Exchange (MSE) and to present alternative “scenario” methodology for discounted free cash flow to firm valuation. Materials and methods: By using publicly available data from MSE we are calculating stock prices with three stock valuation models: Discounted Free Cash Flow, Dividend Discount and Relative Valuation. Results: The evaluation of performance of three stock valuation models at the MSE identified that model of Price Multiplies (P/E and other profitability ratios) offer reliable stock values determination and lower level of price errors compared with the average stocks market prices. Conclusions: The Discounted Free Cash Flow (DCF) model provides values close to average market prices, while Dividend Discount (DDM) valuation model generally mispriced stocks at MSE. We suggest the use of DCF model combined with relative valuation models for accurate stocks’ values calculation at MSE.
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Guo, Hongtao. "After-Tax Discounting: A Research Edge." Journal of Accounting, Business and Management (JABM) 27, no. 1 (May 1, 2020): 86. http://dx.doi.org/10.31966/jabminternational.v27i1.565.
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This research note addresses after-tax discounting for pricing assets. Specifically, it analyzes the appropriate way to discount after-tax payoffs from assets that trade in capital markets in which both taxable and tax-free investors can buy and sell both taxable and tax-free instruments. The effect of the tax status of the investor and the tax status of the financing tool that an investor uses on price of an asset are discussed. Secondly, it derives the proper after-tax discount rate to use in the risk neutral valuation method for pricing assets that have state-contingent payments, typically structured in a lease based transaction. Dynamic state-contingent payoffs and cash flow processes are developed. Pre-tax discounted price, after-tax discounted payoffs are considered, then after-tax discount rate is derived. Included in this analysis of state-contingent discounting is the effect of depreciation expense, the only expense associated with the use of the asset, on after-tax discount rates.
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Guo, Hongtao. "After-Tax Discounting: A Research Edge." Journal of Accounting, Business and Management (JABM) 27, no. 2 (October 23, 2020): 86. http://dx.doi.org/10.31966/jabminternational.v27i2.694.
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This research note addresses after-tax discounting for pricing assets. Specifically, it analyzes the appropriate way to discount after-tax payoffs from assets that trade in capital markets in which both taxable and tax-free investors can buy and sell both taxable and tax-free instruments. The effect of the tax status of the investor and the tax status of the financing tool that an investor uses on price of an asset are discussed. Secondly, it derives the proper after-tax discount rate to use in the risk neutral valuation method for pricing assets that have state-contingent payments, typically structured in a lease based transaction. Dynamic state-contingent payoffs and cash flow processes are developed. Pre-tax discounted price, after-tax discounted payoffs are considered, then after-tax discount rate is derived. Included in this analysis of state-contingent discounting is the effect of depreciation expense, the only expense associated with the use of the asset, on after-tax discount rates
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Zhukov, P. E. "New Models for Analyzing Changes in Company Value Based on Stochastic Discount Rates." Finance: Theory and Practice 23, no. 3 (June 25, 2019): 35–48. http://dx.doi.org/10.26794/2587-5671-2019-23-3-35-48.
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We propose new models for analyzing changes in the value of the company using stochastic discount rates. It is shown that for the majority of the companies under study, local changes in the rate of the company value growth (percentage changes to the previous level) are not explained by the corresponding changes neither in the weighted average cost of capital (WACC), nor in the cash flows. This fact, as well as the research results by J. Cochrane, who proved that discount rates volatility is the main contributor to price volatility, became initial prerequisites for building models based on stochastic discount rates. The work presents three models built on stochastic discount rates, where cash flows are assumed to be growing with a certain trend, and the factors affecting the price of the company are described by stochastic discount factors. These models are alternative in relation to the commonly used traditional cash flow discounting (DCF) models where the free cash flow is discounted through the WACC, or the free flow to capital at the opportunity cost of equity. The first model is used to analyze the dependence of the company value on investments. It uses free cash flow subject to zero growth. The second model uses net cash flow from operating activities plus interest, minus the minimum investment subject to zero growth. The third model uses net cash flow from operating activities plus interest adjusted to taxes. This model requires to estimate the rates of the company downsizing subject to zero investment. The third model is applicable for companies with volatile investments, where it is difficult to reliably estimate free cash flow in case of zero growth. The models are designed for analysis of the factors influencing the value of the company for value-based management. Another application of the models is the evaluation of investment value of the company and the answer to the question of its possible overestimated or underestimated value. The third way to apply this model is the empirical evaluation of the weighted average cost of capital applicable to the company’s investment projects, alternative to WACC, assessed by standard methods.
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Gallant, A. Ronald, and George Tauchen. "Cash Flows Discounted Using a Model-Free SDF Extracted under a Yield Curve Prior." Journal of Risk and Financial Management 14, no. 3 (March 4, 2021): 100. http://dx.doi.org/10.3390/jrfm14030100.
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We developed a model-free Bayesian extraction procedure for the stochastic discount factor under a yield curve prior. Previous methods in the literature directly or indirectly use some particular parametric asset-pricing models such as with long-run risks or habits as the prior. Here, in contrast, we used no such model, but rather, we adopted a prior that enforces external information about the historically very low levels of U.S. short- and long-term interest rates. For clarity and simplicity, our data were annual time series. We used the extracted stochastic discount factor to determine the stripped cash flow risk premiums on a panel of industrial profits and consumption. Interestingly, the results align very closely with recent limited information (bounded rationality) models of the term structure of equity risk premiums, although nowhere did we use any theory on the discount factor other than its implied moment restrictions.
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Marques, Mariana Titoto, Bruno José Canassa, William Aparecido Maciel da Silva, Jéssica de Morais Lima, Fabiano Guasti Lima, and Flávia Zóboli Dalmácio. "Impact of accounting choice of dividends on the company’s value: Initial evidences." Enfoque: Reflexão Contábil 38, no. 2 (September 16, 2019): 01–13. http://dx.doi.org/10.4025/enfoque.v38i2.41799.
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The theme "value" always draws attention in discussions because its concept is linked to a high subjectivity. There are many models that try to get to an asset or a company’s value, which in addition to dealing with the subjectivity of the term, also must deal with several projections. The model of free cash flow is quoted in the literature. This method is affected by the variation of working capital which is the difference between assets and liabilities that is considered operational, calculated by Fleuriet’s Model, but to classify as operational is up to the evaluator/analyst. There are many choices for those who prepare the accounting reports too, what is called in the literature as the accounting choices. Example of the accounting choices is the treatment of interest, dividend and interest on shareholders' equity. Thus, if any account is classified as operational, this could impact the calculation of working capital and maybe, the value of a firm. This study analyzed whether there is an impact on the value, calculated by the discounted cash flow method, resulting from the accounting choice of dividends. Starting from the company's cash flow approach, which is affected by working capital, the sample was made by 80 companies in the Bovespa New Market between 2011 and 2015. Based on tests of mean and sign differences, the results confirmed what was expected: the dividend affects the free cash flow calculation and, moreover, should affect the company’s value.
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Vrbka, Jaromír, and Pavla Vitková. "The applicability of FCFF method evaluating an enterprise of Real Estate segment." SHS Web of Conferences 91 (2021): 01042. http://dx.doi.org/10.1051/shsconf/20219101042.
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The article aims at evaluating a specific enterprise of the Real Estate segment using FCFF (Free Cash Flow to Firm) method. This technique determines the company’s value through free cash flows. Enterprise valuation presents a distinct discipline requiring appraiser’s deep understanding not only of the evaluated enterprise but also other external decisive influences. The theoretical part focuses on calculation procedures using The CAPM (Capital Asset Pricing Model) model quantifying separate variables that determine discount rates. The suggested technique deals with specific financial data of the company and is applicable in evaluating small and medium-sized enterprises.
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Vayas-Ortega, Germania, Cristina Soguero-Ruiz, José-Luis Rojo-Álvarez, and Francisco-Javier Gimeno-Blanes. "On the Differential Analysis of Enterprise Valuation Methods as a Guideline for Unlisted Companies Assessment (I): Empowering Discounted Cash Flow Valuation." Applied Sciences 10, no. 17 (August 25, 2020): 5875. http://dx.doi.org/10.3390/app10175875.
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The Discounted Cash Flow (DCF) method is probably the most extended approach used in company valuation, its main drawbacks being probably the known extreme sensitivity to key variables such as Weighted Average Cost of Capital (WACC) and Free Cash Flow (FCF) estimations not unquestionably obtained. In this paper we propose an unbiased and systematic DCF method which allows us to value private equity by leveraging on stock markets evidences, based on a twofold approach: First, the use of the inverse method assesses the existence of a coherent WACC that positively compares with market observations; second, different FCF forecasting methods are benchmarked and shown to correspond with actual valuations. We use financial historical data including 42 companies in five sectors, extracted from Eikon-Reuters. Our results show that WACC and FCF forecasting are not coherent with market expectations along time, with sectors, or with market regions, when only historical and endogenous variables are taken into account. The best estimates are found when exogenous variables, operational normalization of input space, and data-driven linear techniques are considered (Root Mean Square Error of 6.51). Our method suggests that FCFs and their positive alignment with Market Capitalization and the subordinate enterprise value are the most influencing variables. The fine-tuning of the methods presented here, along with an exhaustive analysis using nonlinear machine-learning techniques, are developed and discussed in the companion paper.
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Thompson, Joseph, and David Neuzil. "Providing a Framework for Testing the Reasonableness of Terminal Period Cash Flow Investments." Business Valuation Review 39, no. 1 (September 1, 2020): 5–13. http://dx.doi.org/10.5791/19-00009.1.
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Whether using the traditional Gordon Growth formula or the value driver formula, it is common for a valuer to neglect testing the reasonableness of the capitalized free cash flow used in determining the terminal value and, therefore, derive a terminal value that is incorrect. This is troubling considering how important the terminal value is when concluding an equity value; the terminal value most often accounts for a majority of the concluded enterprise value when applying the Discounted Cash Flow method. The purpose of this article is to provide a framework for testing the reasonableness of the amount of terminal cash flow that is reinvested to support the operations into perpetuity. In general, there are three potential areas for a company to reinvest into its future operations: (1) net working capital, (2) purchases of property, plant, and equipment (PP&E), and (3) other investments (e.g., research and development [R&D]). Our article provides an overview of a suggested method for analyzing and calculating the appropriate amount of investments in net working capital and PP&E under the Gordon Growth formula. We also provide an example analysis to illustrate potential issues resulting from expensed investments (e.g., R&D) when applying the value driver formula.
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Zhukov, P. E. "Does Enterprise Value Really Depend on WACC and Free Cash Flow? The Evidence of Irrationality from the Oil and Gas Sector." Review of Business and Economics Studies 6, no. 1 (March 30, 2018): 17–28. http://dx.doi.org/10.26794/2308-944x-2018-6-1-17-28.
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The main objective is to check whether traditional DCF model, based on stable rational expectations for cash flows and discount rates really works in an intermediate term-from a quarter to three years. The sample was formed from six major companies of oil and gas sector. The main conclusions are-changes of enterprise value are independent of the changes WACC, free cash flow, and operating cash flows. This may be explained by the impossibility to make durable assessment neither for expected cash flow nor for the discount rate, which in fact means failure of strongly rational models like CAPM or MM. To handle out this implied irrationality the new model proposed, based on the stochastic cost of capital, which follows the model of generalized method of moments by J. Cochrane.
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Jezkova, Veronika, Zuzana Rowland, Veronika Machova, and Jan Hejda. "The Intrinsic Value of an Enterprise Determined by Means of the FCFE Tool." Sustainability 12, no. 21 (October 26, 2020): 8868. http://dx.doi.org/10.3390/su12218868.
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This paper deals with the determination of the intrinsic value of the company Seznam.cz, a.s. using discounted cash flow. Specifically, it is concerned with determining the value of the business from the perspective of the company’s shareholders. The Free Cash Flow to Equity (FCFE) method is chosen for analysis and determination of the value. According to this method, the specific FCFE values are discovered. However, the enterprise value must also be analyzed on the basis of other key indicators, such as financial leverage, the Capital Asset Pricing Model (CAPM) method, or the net present and future value of the FCFE. This is especially important so that the results can be put into mutual relations and a sufficient representative value of the FCFE results can be achieved. Input values stem from the company’s annual reports. From the results of the mentioned methods and indicators, it was found that the value of the FCFE is quite high, which means that the capital used is used appropriately. Based on the result of the continuing value of the FCFE, it can be said that the company’s intrinsic value is at a very good level.
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Allee, Kristian D., Devon Erickson, Adam M. Esplin, and Teri Lombardi Yohn. "The Characteristics, Valuation Methods, and Information Use of Valuation Specialists." Accounting Horizons 34, no. 3 (April 1, 2020): 23–38. http://dx.doi.org/10.2308/horizons-19-057.
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SYNOPSIS We provide insights into the inputs and valuation models used by valuation specialists. We survey 172 valuation specialists and conduct several follow-up interviews covering various topics, including the valuation inputs, models, and industry information that they use, as well as how they estimate long-term growth and the cost of capital. We find that valuation specialists rely on their professional judgment to select a valuation model but prefer the discounted cash flow (DCF) model. They primarily rely on the firm's historical performance when forecasting the financial statements, but communication with management is particularly relevant for forecasting future earnings or cash flows. When estimating the cost of capital, they most commonly use the risk-free rate with subjective adjustments. The results of our study provide insights on the information use of valuation specialists that are relevant to other valuation specialists, managers, academic researchers, and regulators. JEL classification: M41; G12; G17; G32.
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Mareta, Fitri, Heliani Heliani, Siti Elisah, Andini Ulhaq, and Indri Febriani. "Analysis of Islamic Banks’ Merger in Indonesia." Jurnal Riset Ekonomi Manajemen (REKOMEN) 4, no. 2 (April 30, 2021): 112–20. http://dx.doi.org/10.31002/rn.v4i2.3672.
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Islamic bank is a bank that collects funds from the public by using system profit sharing for every profit it gets and in carrying out its activities in accordance with Islamic law. Remembering that in Indonesia most of the population is Muslim, therefore they need a bank that works in accordance with Islamic law. Considering the number of percentages of Islamic banks in Indonesia are still small and cannot yet dominate the market share, therefore this research is expected to find out whether the merging of 3 Islamic banks (BRIS, BSM and BNIS) able to control market share or not. To see the synergy resulting from this merger is used methods Discounted Cash Flow - Free Cash Flow to Equity and Relative Valuation - Price to Book Ratio. The data used are the financial statements of each bank from 2014 to 2019 which are available on the Indonesia Stock Exchange (IDX) or the websites of each bank.
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Solodov, A. A. "Stochastic Method of Discounted Cash Flows." Statistics and Economics 18, no. 1 (March 3, 2021): 67–74. http://dx.doi.org/10.21686/2500-3925-2021-1-67-74.
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The method of discounted cash flows (DCF) is one of the main and popular methods of economic assessment of business, which is used all over the world. However, the actual behavior of business projects evaluated by this method often differs from that predicted, and the difference can be tens of times.It should be noted that at present, the discounted cash flow method is a subject of extensive literature, but there are no analytical arguments for large discrepancies between the theory and practice of the method. The aim of the study is to provide a theoretical explanation of the forecasting errors inherent in the discounted cash flow method. The research method is related to the analysis of the traditional method of discounted cash flows, which shows that the key indicator that affects the final result is the net income for a certain period of time. Analyzing the economic content of the flows that appear in the formation of net income, we can conclude that for a trade-type enterprise, the cash flow of receipts associated with current operations is significantly random and, therefore, requires the use of stochastic description methods.The paper offers a mathematical model of the mentioned cash flow. It is assumed that the event associated with a purchase (cash receipt) is modeled on the time axis by a point with a random time of occurrence. Then, obviously, the number of points n that appear on a fixed time interval will be a random number. A justification is given for the fact that the point process is a Poisson random point process or simply a Poisson point process, in which the times of occurrence of points W1 ,W2 , ..., Wi and their number N(t) at time t are random variables. We introduce the function λ(t), which characterizes the average number of cash receipts (purchases) per unit of time. From an economic point of view, it is driven by consumer preferences of buyers, and from a mathematic point of view it is a function of the intensity of appearance of points of the Poisson process. The monetary values of purchases made by customers are described by random positive ui values which arise at the Wi moments of the occurrence of shopping events, simulate a random process of cash receipts at the enterprise.Introduction to the consideration of the random Poisson flow of business receipts and their values, which are also random positive values with an arbitrary probability distribution, is the key assumption of the work. The proposed approach allowed us to develop a stochastic model of the company’s revenues, generalize the method of discounted cash flows, obtain a number of simple ratios, and on this basis explain the growth of the method forecast error with an increase in the duration of the forecast horizon.New results of the study are the use of stochastic methods to describe business revenues and expressions obtained on this basis for the variance and standard deviation of the company’s net cash flow, depending on the number of forecasting periods. It is shown that the growth of the standard deviation of the net cash flow, i.e. the forecasting errors, is a fundamental feature of the method in this interpretation. For the initial estimates, a simple expression is obtained and corresponding graphs are given.In conclusion, it is noted that the presented graphs of the behavior of the standard deviation of the method estimates show that the estimate from below of the mentioned deviation slowly grows with an increase in the number of prediction periods and depends only on the number of periods. It is noted that this growth is calculated in relation to the first forecast period, which itself may contain errors, and it is determined only by consumer preferences. Of course, you can choose the forecast period not a month, but, for example, a year, but then the error of the first period will be significantly increased. Thus, this review makes it possible to explain some aspects of the growth of the error of the discounted cash flow method with the forecast time.
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KATO, KELLY. "Valuation Of “S” Corporations Discounted Cash Flow Method." Business Valuation Review 9, no. 4 (December 1990): 117–22. http://dx.doi.org/10.5791/0882-2875-9.4.117.
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Bondarchuk, Alina. "PROBLEMS BUSINESS VALUATION ENTERPRISES DISCOUNTED CASH FLOW METHOD." Drukerovskij vestnik, no. 1 (March 2015): 142–46. http://dx.doi.org/10.17213/2312-6469-2015-1-142-146.
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Sinclair, David R. "Capital budgeting decisions using the discounted cash flow method." Canadian Journal of Anesthesia/Journal canadien d'anesthésie 57, no. 7 (March 20, 2010): 704–5. http://dx.doi.org/10.1007/s12630-010-9304-6.
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Janiszewski, Sławomir. "How to Perform Discounted Cash Flow Valuation?" Foundations of Management 3, no. 1 (January 1, 2011): 81–96. http://dx.doi.org/10.2478/v10238-012-0037-4.
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How to Perform Discounted Cash Flow Valuation?Within the last few decades the quickly accelerating globalization processes contributed to rapid increase in the value of the global capital markets, and mergers and acquisitions transactions. This implicated the rising importance of methodologies that enable investors to efficiently value the companies. The aim of this elaboration is to present practical approach towards the discounted cash flow company valuation method, considered one of the most effective but simultaneously one of the most sophisticated among all. The article comprises purely theoretical as well as practical knowledge, based on the author's broad professional experiences.
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Kaplan, Steven N., and Richard S. Ruback. "THE MARKET PRICING OF CASH FLOW FORECASTS: DISCOUNTED CASH FLOW VS. THE METHOD OF "COMPARABLES"." Journal of Applied Corporate Finance 8, no. 4 (January 1995): 45–60. http://dx.doi.org/10.1111/j.1745-6622.1995.tb00682.x.
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Kaplan, Steven N., and Richard S. Ruback. "THE MARKET PRICING OF CASH FLOW FORECASTS: DISCOUNTED CASH FLOW VS. THE METHOD OF "COMPARABLES"." Journal of Applied Corporate Finance 8, no. 4 (January 1996): 45–60. http://dx.doi.org/10.1111/j.1745-6622.1996.tb00682.x.
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Bielinski, Daniel W. "The “Debt-Free” (“Financing Neutral”) Discounted Cash Flow: Capital Structure Assumptions." Business Valuation Review 7, no. 4 (December 1988): 163–68. http://dx.doi.org/10.5791/0882-2875-7.4.163.
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Mari, Carlo, and Marcella Marra. "Valuing firm’s financial flexibility under default risk and bankruptcy costs: a WACC based approach." International Journal of Managerial Finance 15, no. 5 (June 21, 2019): 688–99. http://dx.doi.org/10.1108/ijmf-05-2018-0151.
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PurposeThe purpose of this paper is to present a model to value leveraged firms in the presence of default risk and bankruptcy costs under a flexible firm’s debt structure.Design/methodology/approachThe authors assume that the total debt of the firm is a combination of two debt components. The first component is an active debt component which is assumed to be proportional to the firm’s value. The second one is a passive predetermined risk-free debt component. The combination of the two debt categories makes the firm’s capital structure more realistic and allows us to include flexibility into the firm’s debt structure management. The firm’s valuation is performed using the discounted cash flow technique based on the weighted average cost of capital (WACC) method.FindingsThe model can be used to define active debt management strategies that can induce the firm to deviate from its capital structure target in order to preserve debt capacity for future funding needs. The firm’s valuation is performed by using the WACC method and a closed form valuation formula is provided. Such a formula can be used to value costs and benefits of financial flexibility.Research limitations/implicationsThe proposed approach provides a good compromise between mathematical complexity and model capability of interpreting the various economic and financial aspects involved in the firm’s debt structure puzzle.Practical implicationsThis model offers a realistic approach to practical applications where real financing decisions are characterized by a simultaneous use of these two debt categories. By comparing costs and benefits deriving from using unused debt capacity for future funding needs, the model provides a quantitative support to investigate if financial flexibility can add value to firms.Originality/valueTo the authors knowledge, the approach the authors propose is the first attempt to build a valuation scheme that accounts for firm’s financial flexibility under default risky debt and bankruptcy costs. Including financial flexibility, this model fills an important gap in the literature on this topic.
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Gardner, John C., Carl B. McGowan, Jr, and Susan E. Moeller. "Valuing Coca-Cola Using The Free Cash Flow To Equity Valuation Model." Journal of Business & Economics Research (JBER) 10, no. 11 (October 26, 2012): 629. http://dx.doi.org/10.19030/jber.v10i11.7362.
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<span style="font-family: Times New Roman; font-size: small;"> </span><p style="margin: 0in 0.5in 0pt; text-align: justify;" class="MsoNormal"><span style="font-size: 10pt;"><span style="font-family: Times New Roman;">In this paper, we provide a detailed example of applying the free cash flow to equity valuation model proposed in Damodaran (2006).<span style="mso-spacerun: yes;"> </span>Damodaran (2006) argues that the value of a stock is the discounted present value of the future free cash flow to equity discounted at the cost of equity.<span style="mso-spacerun: yes;"> </span>We combine the free cash flow to equity model with the super-normal growth model to determine the current value of Coca-Cola.<span style="mso-spacerun: yes;"> </span>At the time of this paper, we determined a value of Coca-Cola at $161 billion using the free cash flow to equity model, and the actual market value of Coca-Cola was $150 billion.<span style="mso-spacerun: yes;"> </span><strong style="mso-bidi-font-weight: normal;"></strong></span></span></p><span style="font-family: Times New Roman; font-size: small;"> </span>
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Valach, Josef. "Usual Errors Evaluation of Investment Projects with Discounted Cash Flow Method." Český finanční a účetní časopis 2008, no. 2 (June 1, 2008): 21–30. http://dx.doi.org/10.18267/j.cfuc.266.
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NAKAMURA, Takaaki, Masaru HOSHIYA, and Tomoya MOCHIZUKI. "ASSET PRICING ANALYSIS CONSIDERING SEISMIC RISK BY STOCHASTIC DISCOUNTED CASH FLOW METHOD." Doboku Gakkai Ronbunshu, no. 752 (2004): 169–78. http://dx.doi.org/10.2208/jscej.2004.752_169.
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Dzikevičius, Audrius, Edvard Michnevič, and Olga Ževžikova. "Stochastic Model of Business Evaluation." Verslas: teorija ir praktika 9, no. 3 (March 31, 2011): 229–36. http://dx.doi.org/10.3846/1648-0627.2008.9.229-236.
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Business (company) evaluation became a very important matter to Lithuania by now. Business evaluation is necessary for companies purchase or consolidation process analysis and for correct decision-making. The problem of business evaluation is analyzed in the paper. The paper examines discounted cash flow method for evaluation cash flow in the future discounted to the present value. Aspects of incorporation of risk measurement into the process of business evaluation are examined. Meanings of factors influencing the value are simulated using imitative technologies. The stochastic model of business evaluation is composed and researched in the article.
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Silva, Joao Marques, and Jose Azevedo Pereira. "Over-Valuation: Avoid Double Counting when Retaining Dividends in the FCFE Valuation." International Journal of Financial Research 8, no. 4 (September 11, 2017): 107. http://dx.doi.org/10.5430/ijfr.v8n4p107.
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Valuation based on DCF (Discounted Cash Flow) has been the dominant valuation procedure during the last decades. In spite of this dominance, enterprise valuation using the discounted FCF (Free Cash Flow) model has some practical drawbacks, since there is often some confusion on how to effectively use it. Commonly, the valuation procedures start by estimating future FCF figures from historical data, such as mean FCF, growth and retention ratio, alongside many other variables. These FCF forecasts are discounted at the cost of equity (FCFE – FCF to Equity) or the Weighted Average Cost of Capital WACC (FCFF – FCF to Firm). Implicit in the above mentioned valuation procedures is the expectation that the company puts the retained free cash that is generating to good use, yielding a value capable of rewarding appropriately the level of risk inherent in the way it used. Some poorly performed valuation studies however tend to double count (Damodaran, 2006a) the retained cash’s interest in subsequent values of FCF, or include the accumulated cash build-up in the Terminal Value. This paper discusses how these two common double-counting mistakes are made and evaluates their weight in the final valuation figure for the particular case of retained FCFE (the case for the FCFF is analogous, but we focus on FCFE for simplicity) using projected figures.
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Islam, K. M. Anwarul. "An Empirical Research on Beximco Knitting Ltd: Ratio, DuPont, Valuation and Pro-Forma Analysis." Indian Journal of Finance and Banking 1, no. 1 (July 17, 2017): 1–7. http://dx.doi.org/10.46281/ijfb.v1i1.80.
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Beximco Knitting Ltd belongs to the Textile Industry. This paper examines some ratio analysis that showed the overall internal liquidity position of the company, that is not satisfactory; because of the entire ratio performance is not good, operating efficiency ratio is not good, indicates that lower efficiency generate capacity in terms of sale, debt-equity ratio is increasing overtime in order to employ the more debt financing as long-term borrowing compare to the equity financing, which make the firm more risky. Beximco Knitting Ltd is more sensitive to leverage compare to net profit margin and Asset turnover Discounted Cash Flow Analysis Model is using for valuation of the Beximco Knitting Ltd‘s prospective analysis. Forecasting the cash flow we have to use 2016-2017 as the base year of foresting cash flow for 2018-2020.The terminal growth rate of free cash flow is 2% and the present value of free cash flow is arrived using the 'Exit Multiple' model.Free cash flow to equity is discounted 10.77% to arrive at an estimated present value of free cash flows available to equity (debt and equity holders as a group), which is also known as Enterprise Value. Equity value per share (142.07) on the other hand, the market price of Beximco Knitting is 47.5tk per share, which indicates the share price is undervalued. Under pro-forma analysis we find out that all items of the financial statement is improving based on the assumption, but as investor‘s perspective we think investing in that company is not beneficial over the long run.Because the company can‘t earn positive return until 2020. Findings of the artcle are to really negative signs in accordance the investor‘s perspective, because its earnings per share are not attractive as much to invest.
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BASCI, Esref Savaş. "FIRM VALUATION CONCEPT AND DISCOUNTED CASH FLOW METHOD: A COMPARISON OF STOCK MARKETS." Annals of Spiru Haret University. Economic Series 19, no. 2 (June 28, 2019): 51–60. http://dx.doi.org/10.26458/1922.
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Company (or firm) valuation – an evaluation process of a company to appreciate the value of a company’s right in this company or business. There are two objective and subjective aspects of value. The subjective value is the value determined by individuals and desires. For example, it is a subjective decision that the investor assesses the competitor over the normal to be monopoly in the market. The objective value is the value determined by the cost and benefits of the goods and services.Although there are many performance measures that measure company success, none is as comprehensive as value. There is a strong and linear relationship between a company’s market value and its discounted cash flows. Because earnings are used to generate the income statement, they cannot be used to measure cash flows.Firm valuation means seeking the goal of the firm which is listing it on the Stock Exchange. Real value of the firm can be calculate with different methodologies. These methods are related to future expectations or background of the firm’s financial data. Discounted Cash Flow (DCF) Method is one of the firm valuation methods used all around the world and it is accepted by the experts.Market value is also used for comparison and performance measurement purposes. Valuation of a company’s future expectations, current status, mergers or acquisitions is extremely important. Even the firm value can be used to compare the capital markets of countries. In our study, capital markets and total market values of selected countries are compared. The increase in the share price increases the market value of the company. Therefore, the aim of the firms should be to increase the shareholder value or to take decisions to increase the stock price.
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Hakim, Muhammad Akhirul, Dr Raden Aswin Rahadi, and M. Akmal Adrianza. "VALUATION BUSINESS IN PEER TO PEER LENDING WITH DISCOUNTED CASH FLOW (DCF) METHOD." Advanced International Journal of Banking, Accounting and Finance 2, no. 3 (June 10, 2020): 01–12. http://dx.doi.org/10.35631/aijbaf.23001.
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Start-up companies are businesses that are now very popular in Indonesia. To support the business moving fast, these businesses need investors by offering the company's fair value. With similar but not the same calculation, in which start-up companies have different financial indicators and financial assumptions with conventional companies, in this case, the valuation is included innovation value and disruption probability. This research is a descriptive study which is based on case studies in the research object. The object of research is PT ABC, a company engaged in the field of Financial Technology. Data collection is done by collecting secondary data from the company and observation during the internship. The analysis is done by conducting a sensitivity analysis with the DCF method using Microsoft Excel. Valuation is also very closely related to Financial Projection to predict the state of the industry pear to pear landing in the future. The data shows that the enterprise value is Rp. 46,084,735,403,742. Then, EV/Revenue is 1,748 times, and the percentage of raise is 100%. According to DCF Valuation, the author suggests investors invest in the company. Because the valuation is very good.
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Karminsky, A., and E. Frolova. "Methods of Bank Valuation in the Age of Globalization." MGIMO Review of International Relations, no. 3(42) (June 28, 2015): 173–83. http://dx.doi.org/10.24833/2071-8160-2015-3-42-173-183.
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This paper reviews the theory ofvalue-based management at the commercial bank and the main valuation methods in the age of globalization. The paper identifies five main factors that significantly influence valuation models selection and building: funding, liquidity, risks, exogenous factors and the capital cushion. It is shown that valuation models can be classified depending on underlying cash flows. Particular attention is paid to models based on potentially available cash flows (Discounted cash flow-oriented approaches, DCF) and models based on residual income flows (Residual income-oriented approaches). In addition, we consider an alternative approach based on comparison with same sector banks (based on multiples). For bank valuation equity discounted сash flow method is recommended (Equity DCF). Equity DCF values equity value of a bank directly by discounting cash flows to equity at the cost of equity (Capital Asset Pricing Model, CAPM), rather than at the weighted average cost of capital (WACC). For the purposes of operational management residual income-oriented approaches are recommended for use, because they are better aligned with the process of internal planning and forecasting in banks. For strategic management residual income-oriented methods most useful when expected cash flows are negative throughout the forecast period. Discounted сash flow-oriented approaches are preferable when expected cash flows have positive values and needs for models using is motivated by supporting the investment decisions. Proposed classification can be developed in interests of bank management tasks in the midterm in the age of globalization.
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HENRIQUE POLICARPO NEVES, MARCOS. "AVALIAÇÃO FINANCEIRA ATRAVÉS DA FERRAMENTA VALUATION, PELO MÉTODO DO FLUXO DE CAIXA DESCONTADO, NO BANCO DE CAPITAL ABERTO ITAÚ UNIBANCO HOLDING S.A." Revista Científica Semana Acadêmica 9, no. 205 (September 17, 2021): 1–17. http://dx.doi.org/10.35265/2236-6717-205-9171.
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The valuation process of companies is essential for investors to estimate the fair value of a company. Once it has been established, it is possible to compare with the market value and thus judge whether an asset is cheap, fair or expensive. There are several methodologies for calculating the valuation of a company, among which the following stand out: method of market multiples; discounted cash flow method; method based on the book value. In this sense, the present work aims to evaluate the fair price of the shares of Itaú Unibanco bank (ITUB4) through the discounted cash flow method. For this, data about the company were used from the balance sheet and the statement of income for the year, made available on the internet by the bank. After these data analyzes and the establishment of some assumptions, the cash flow for the next 10 years was projected. From this, the flows were brought to present value, to calculate the fair price of the company's shares, using an appropriate discount rate. As a final result, the model indicates that the shares are undervalued by the market, that is, they are cheap and with a growth potential of 32%.
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Ann Brotman, Billie. "Green office construction: a discounted after-tax cash flow analysis." Journal of Property Investment & Finance 32, no. 5 (July 29, 2014): 474–84. http://dx.doi.org/10.1108/jpif-01-2014-0007.
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Purpose – The purpose of this paper is to address the apparent slow acceptance on the part of developers located in the USA to seek green certifications. If green-certified construction costs more than non-green construction, then is there a financial reason for not seeking a green rating. Do green buildings perform better than non-green buildings financially? The paper develops and presents a discounted present value model for doing a cost-benefit analysis for building green. This model enables an investor to determine the feasibility of constructing a new green-certified building instead of a conventional non-green building. Non-green buildings are not certified by a rating agency such as Leadership in Energy and Environmental Design (LEED), Energy Star or Building Research Establishment Environmental Assessment Method (BREEAM). Real estate permits are granted by local municipalities in the USA. This means that local government mandates requiring green construction that significantly adds to the initial cost of a project could have the unintended result of encouraging new non-green construction just outside their municipal boundaries. Design/methodology/approach – The paper collects publically available research data for office buildings located in the USA, and inputs this information into an income statement. It tests the hypothesis: is green-certified construction a financially feasible choice for an investor? An incremental approach using a 15-year holding period is presented. This time period takes into account equipment wear and tear. Heating/cooling systems and other green-technologically based operating systems have a limited life and do not last for 30 or 40 years. They are likely to need replacement after 15 years have lapsed. Findings – The negative net present value (NPV) results and high payback periods indicate that increased rents for green construction, a tax credit for the present value loss and/or property-tax reduction covering the shortfall is needed as an incentive to commercially build green. The implication of a negative NPV is that green office buildings will be built by government agencies where green is mandated, corporations that want a green image and benefit from this image, where local ordinances mandate green construction features and where local and federal tax incentives are available increasing a construction project's feasibility. Research limitations/implications – The limitation of any cost-benefit study is that analytical models and/or data used to forecast energy and water consumption savings in green-certified buildings compared to conventional buildings can be inaccurate. Forecasting models can understate or overstate the actual savings realized from green construction especially in the long-term given the difficulty of predicting equipment wear and tear, net rents and energy costs. The modeled percentage cost associated with green new construction features could remain constant or grow through time. Tables I and II results assume energy and water expenses remain a constant percentage over the 15-year period. The agency costs associated with obtaining a LEED or BREEAM certification was not calculated as an upfront cost. Certification by LEED or BREEAM increases the upfront cost associated with building a green building. Practical implications – The length of the payback period estimates coupled with negative NPV for green certified compared to non-green construction suggests that developers do not have an incentive to build green. Higher WACC rates would result in green-certified projects being less feasible to build. Social implications – The LEED certification point system may need to be reviewed. Points are assigned for features that improve occupant satisfaction, but may have little impact on reducing energy usage. Originality/value – A model is presented for determining whether green-certified construction is financially feasible. The model enables the investor to determine the size of a tax incentive that is needed to enable new green construction to be economically feasible to build. The higher the negative NPV the larger the income or property tax incentive or other financial incentives needed. Prior research studies compared green and non-green buildings, but did not compare the energy savings generated to the additional construction and upfront costs incurred using a discount rate. They assumed the energy savings justified the additional initial cost associated with building a new green certified.
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Sitthipongpanich, Thitima. "Family ownership and free cash flow." International Journal of Managerial Finance 13, no. 2 (April 3, 2017): 133–48. http://dx.doi.org/10.1108/ijmf-06-2014-0088.
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Purpose The purpose of this paper is to investigate the effect of family ownership on investment-cash flow sensitivity and on firm performance. Design/methodology/approach The author uses panel data to examine the relationship between investment and cash flow and between family ownership and the firm performance of Thai listed firms from 2001 to 2008. To account for the endogeneity of the lagged dependent variable, the investment equation is estimated by the generalized method of moments, following Arellano and Bond (1991). Findings The presence of family owners reduces the sensitivity of investment and cash flow. At low and high levels of family ownership, an increase in family shareholding leads to lower investment-cash flow sensitivity. In contrast, firms with medium family ownership levels have higher investment-cash flow sensitivity. Only at high levels of family ownership is firm performance positively related to family shareholding. Originality/value The ownership levels of family shareholders affect the investment-cash flow sensitivity in an S-shaped relation, supporting the interest alignment and entrenchment effects. When family shareholders have high ownership incentives, their interest alignment reduces the agency costs of free cash flow problems and leads to higher firm performance.
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Mills, W. L., S. D. Shnitzler, and R. S. Meldahl. "Measuring Wildfire Impacts: Method and Case Study." Southern Journal of Applied Forestry 11, no. 3 (August 1, 1987): 143–47. http://dx.doi.org/10.1093/sjaf/11.3.143.
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Abstract A discounted cash flow model called the Impact Appraisal Model (IAM) computes the economic impact due to a change in timber production caused by a wildfire. Data requirements for the IAM can be obtained using standard inventory procedures to estimate the pre- and post-fire stand conditionsneeded to initiate a growth and yield simulator. The model is demonstrated using five loblolly plantations that burned in 1980 and 1981. South. J. Appl. For. 11(3):143-147.
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Almarjan, Lulu, Deni Muhammad Danial, and Dicky Jhoansyah. "Pengaruh Free Cash Flow terhadap Kebijakan Hutang." BUDGETING : Journal of Business, Management and Accounting 1, no. 2 (June 26, 2020): 163–69. http://dx.doi.org/10.31539/budgeting.v1i2.807.
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This study aims to determine how much influence the free cash flow on debt policy at PT Indofood Sukses Makmur Tbk. The method used in this research is descriptive and associative methods with quantitative approaches. The data used is PT Indofood's annual financial statement data for 8 years from 2011 to 2018. The statistical test used is calculation, analysis using simple linear regression including the coefficient of determination test. The results showed that the free cash flow variable gained a significance value of 0.008, which means that there was an influence of free cash flow on the corporate debt policy of PT Indofood Sukses Makmur Tbk. Conclusion, there is a significant influence and strong relationship with the positive direction of the variable free cash flow (free cash flow) on the debt policy at PT Indofood Sukses Makmur Tbk.
Keywords: Free Cash Flow, Debt Policy
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Corbey, Michael, Frans de Roon, and Stef Hinfelaar. "Company life cycle models and business valuation." Maandblad Voor Accountancy en Bedrijfseconomie 93, no. 9/10 (October 28, 2019): 285–96. http://dx.doi.org/10.5117/mab.93.37561.
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Future free cash flow is a crucial element of most business valuation tools, such as the Discounted Cash Flow model, with the quality of the valuation depending heavily on its forecast accuracy. This paper explores the theory on business life cycle (and growth) models in an aim to improve that quality. Life cycle and growth models have been studied in the management and organization literature for decades, but the relevant aspects from a business valuation perspective remain unclear. Reviewing the existing literature, we argue that the five-stage Hanks model (Start-up, Growth, Maturity, Diversification, and Decline) is applicable for valuation purposes. We further argue that life cycle thinking provides useful insights for making grounded assumptions in predicting the future free cash flows and residual value of a company. This paper presents practical valuation approaches and insights for each of the five stages of the Hanks model.
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SHRIEVES, RONALD E., and JOHN M. WACHOWICZ. "FREE CASH FLOW (FCF), ECONOMIC VALUE ADDED (EVA™), AND NET PRESENT VALUE (NPV):. A RECONCILIATION OF VARIATIONS OF DISCOUNTED-CASH-FLOW (DCF) VALUATION." Engineering Economist 46, no. 1 (January 2001): 33–52. http://dx.doi.org/10.1080/00137910108967561.
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MAGNI, CARLO ALBERTO, STEFANO MALAGOLI, and GIOVANNI MASTROLEO. "AN ALTERNATIVE APPROACH TO FIRMS' EVALUATION: EXPERT SYSTEMS AND FUZZY LOGIC." International Journal of Information Technology & Decision Making 05, no. 01 (March 2006): 195–225. http://dx.doi.org/10.1142/s0219622006001812.
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Discounted cash flow techniques are the generally accepted methods for valuing firms. Such methods do not provide explicit acknowledgment of the value determinants and overlook their interrelations. This paper proposes a different method of firm valuation based on fuzzy logic and expert systems. It does represent a conceptual transposition of discounted cash flow techniques but, unlike the latter, it takes explicit account of quantitative and qualitative variables and their mutual integration. Financial, strategic and business aspects are considered by focusing on 29 value drivers that are combined together via "if–then" rules. The output of the system is a real number in the interval [0, 1], which represents the value-creation power of the firm. To corroborate the model a sensitivity analysis is conducted. The system may be used for rating and ranking firms as well as for assessing the impact of managers' decisions on value creation and as a tool of corporate governance.
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Beccace, Francesca, Roberto Tasca, and Luisa Tibiletti. "The Macaulay Duration: A Key Indicator for the Risk-Adjustment in Fair Value." International Journal of Business and Management 13, no. 12 (November 21, 2018): 251. http://dx.doi.org/10.5539/ijbm.v13n12p251.
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International Financial Reporting Standards (IFRS) 13 Fair Value Measurement lays down two methods to adjust Expected Present Value (EPV) for risk. According to Method 1, expected cash inflows should be risk-adjusted by subtracting a risk-premium and discounted at the market risk-free rate, see (IFRS 13, B25). In contrast according to Method 2, expected cash inflows should be discounted at the risk-free rate augmented by a risk-premium addendum, see (IFRS 13, B26). Standard IFRS 13, B29 leaves the freedom to choose between the two methods. The aim of this note is to identify the relationship between the Risk-Adjusted EPVs rolled out from Method 1 and Method 2. First we introduce a theoretical solution to risk-adjustments compliant with the Standard IFRS 13, B29. Then, we set up a user-oriented proxy to connect the risk-premium present in Method 1 with the risk-adjusted rate present in Method 2. This proxy spots light on the key role played by the Macaulay Duration of expected inflows, rather than that of the lifetime of the project. As a consequence, projects expiring at the same redemption date and endowed with the same EPV and/or the same total inflow may differ considerably in risk-adjustments, due to different Macaulay Durations. A user-oriented method to properly to fast evaluate risk-adjustments for multi-cash inflow projects is provided. Sensitivity analysis of the impact of the Macaulay Duration on Risk-Adjusted EPV is also rolled out through numerical examples.
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Felicia, Clarisa. "ANALISIS PENILAIAN PERUSAHAAN PT. PERUSAHAAN GAS NEGARA TBK." Juripol (Jurnal Institusi Politeknik Ganesha Medan) 4, no. 1 (June 10, 2021): 184–88. http://dx.doi.org/10.33395/juripol.v4i1.11027.
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Salah satu sektor penting bagi perkembangan ekonomi Indonesia adalah sektor minyak dan gas bumi . Sayangnya diketahui adanya penurunan dari sektor minyak dan gas bumi dimana pendapatan negara dari sektor ini turun hingga 80% dari Rp. 216.000.000.000.000 (Rp. 216 Triliun) di tahun 2014 menjadi Rp. 44.000.000.000.000 (Rp. 44 Triliun) pada tahun 2016. PT. Perusahaan Gas Negara TBK adalah BUMN yang terbesar di bidang transportasi dan distribusi gas bumi. Penelitian ini bertujuan untuk mengetahui nilai intrinsik per saham PT. Perusahaan Gas Negara TBK dengan metode discounted cash flow menggunakan free cash flow ke perusahaan. Data diperoleh dari laporan keuangan PT. Perusahaan Gas Negara TBK pada tahun 2013 hingga tahun 2018. Hasil penelitian menunjukkan bahwa nilai intrinsik per saham dari PT. Perusahaan Gas Negara TBK adalah Rp. 6.757,72.
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Bataeva, Victoria. "Synergy evaluation in mergers and acquisitions." Scientific notes of the Russian academy of entrepreneurship 19, no. 2 (May 28, 2020): 108–13. http://dx.doi.org/10.24182/2073-6258-2020-19-2-108-113.
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This paper analyzes the M&A deal of Rostelecom and Tele2 Russia in order to evaluate the synergy effect as a result of consolidation. Discounted cash flow method is applied to determine the companies’ enterprise values. As a result of the research, synergy is equal 38 003 million rubles and the M&A deal is recognized as an effective one.
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Joseph, Kissan, and Vernon J. Richardson. "Free Cash Flow, Agency Costs, and the Affordability Method of Advertising Budgeting." Journal of Marketing 66, no. 1 (January 2002): 94–107. http://dx.doi.org/10.1509/jmkg.66.1.94.18453.
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The allocation of excess cash has long been recognized in the finance literature as an important aspect of the basic agency conflict between managers and owners. In the advertising budgeting context, marketing scholars report that firms possessing high levels of cash tend to spend more on advertising than what seems necessary or desirable. Indeed, this positive link between excess cash and advertising expenditures constitutes a part of what is commonly referred to as the affordability method of advertising budgeting. Surprisingly, there has been little research that attempts to view this association as a manifestation of agency costs. Therefore, in this article, the authors examine whether agency costs, as measured by managerial ownership, moderate the relationship between excess cash and advertising expenditures. On the basis of received theory, the authors conceptualize that agency costs will first decrease, then increase, and then decrease again with the level of managerial ownership. Accordingly, the authors hypothesize and find that the fraction of incremental earnings reinvested in advertising follows the same pattern in managerial ownership. These findings support the notion that the use of the affordability method is driven, in part, by agency costs. The authors conclude by discussing the theoretical and managerial implications of the findings.
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Agustia, Dian. "Pengaruh Free Cash Flow Dan Kualitas Audit Terhadap Manajemen Laba." AKRUAL: Jurnal Akuntansi 4, no. 2 (April 2, 2013): 105. http://dx.doi.org/10.26740/jaj.v4n2.p105-118.
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AbstractAsymmetric information refers to a situation where one party has more information than the other party. The agency problems arise from asymmetric information in the principal agent contracts. In addition, there are also several factors that could affect earnings management that is free cash flow and audit quality. The aim of this research is to provide empirical evidence about the impact of free cash flow and audit quality variables on discretionary accruals, as a measure of Earnings Management with the control variables company’s size. This research used 103 manufacturing companies listed in Indonesia Stock Exchange, selected using purposive sampling method, during the research period 2007-2011. Data were analyzed using multiple regression method. Based on the result of analysis concluced that the variable independent free cash flow have a negative and significant effect on earning management. It means that companies with high free cash flow will restrict the practice of earnings management. While the audit quality no significance effect on earning management.
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Kadioglu, Eyup, Saim Kilic, and Ender Aykut Yilmaz. "Testing the Relationship between Free Cash Flow and Company Performance in Borsa Istanbul." International Business Research 10, no. 5 (April 24, 2017): 148. http://dx.doi.org/10.5539/ibr.v10n5p148.
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This study tests whether free cash flow affects the performance of firms in the context of the free cash flow hypothesis. The study applies a panel regression method to a data set consisting of 2,175 observations belonging to 370 companies listed in Borsa Istanbul during the period 2009-2015. A significant, negative relationship is found between free cash flow and firm performance measured by Tobin’s Q ratio. Greater free cash flow in the hands of managers leads to the lower performance and, conversely, less free cash flow in the hands of managers leads to higher performance. The results also confirm that leverage and dividend payments have a positive effect on performance. Thus, the results support the free cash flow hypothesis for Turkey.
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Russell, Mark. "The valuation of pharmaceutical intangibles." Journal of Intellectual Capital 17, no. 3 (July 11, 2016): 484–506. http://dx.doi.org/10.1108/jic-10-2015-0090.
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Purpose – The purpose of this paper is to value the patents of pharmaceutical companies using discounted cash flows, and compare the value-relevance of these assets against alternative intangible asset measures such as reported intangible assets and R & D capital. Design/methodology/approach – The study values pharmaceutical intangibles using three methods: an income method; the sum of unamortised R & D expenditures; the firm’s reported intangible assets. Value-relevance tests use ordinary least squares regression and Vuong and Clarke tests. Findings – First, the study finds that the discounted cash-flow valuation of pharmaceutical patents is value-relevant. Second, the value of pharmaceutical patents explains market value better than reported intangible assets but not R & D capital. However, the valuation of pharmaceutical patents is more consistent with the risks of R & D than the valuation of R & D capital which assumes recovery of R & D expenditure. Originality/value – This is the first known study that values patents using an income method and compares those valuations with reported intangible assets and R & D capital valuation models.
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Permata, Irma Sari, Nana Nawasiah, and Trisnani Indriati. "Free Cash Flow, Kinerja Internal, Dan Pengaruhnya Terhadap Nilai Perusahaan." Liquidity 7, no. 1 (July 13, 2018): 63–69. http://dx.doi.org/10.32546/lq.v7i1.174.
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The purpose of this study is to answer the phenomena that occur both theoretical phenomena and the empirical phenomenon of potential internal conflicts to the free cash flow of the company and its use for the benefit of increasing corporate value. Such internal conflicts require an appropriate settlement so as not to affect the company's failure. This study examines the role of dividend policy and ownership structure in moderating the relationship between free cash flow and firm value on manufacturing companies listed on BEI as many as 236 companies using randon sampling method. Free cash flows, profitability, firm size have a significant effect on company value while company growth has no significant effect. Dividends and majority ownership and managerial moderate free cash flow against corporate value. The results of this study are expected to generate alternative solutions to free cash flow problems and increase the value of the company.
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Isobe, Yoshihiro, Mitsuyuki Sagisaka, Shinobu Yoshimura, and Genki Yagawa. "Economic Evaluation of Maintenance Strategies for Steam Generator Tubes Using Probabilistic Fracture Mechanics and a Financial Method." Solid State Phenomena 120 (February 2007): 119–26. http://dx.doi.org/10.4028/www.scientific.net/ssp.120.119.
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As an application of probabilistic fracture mechanics (PFM) and a financial method, a risk-benefit model was developed for the purpose of optimizing maintenance activities of steam generator (SG) tubes used in pressurized water reactors (PWRs). To justify whether or not it is worth while implementing the selected maintenance strategy in terms of an economic point of view, net present value (NPV) was calculated as an index which is one of the most fundamental financial indices for decision-making based on the discounted cash flow (DCF) method.
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Park, Sangkyun. "Optimal Discount Rates for Government Projects." ISRN Economics 2012 (July 17, 2012): 1–13. http://dx.doi.org/10.5402/2012/982093.
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Project selection based on the net present value can be optimal only if the discount rate is optimal. The optimal discount rate for a government project can be a risk-free rate, a comparable market rate (market interest rate corresponding to the risk of cash flows to the government), or an adjusted market rate, depending on circumstances. This paper clarifies the conditions for each case. Provided that the optimal discount rate is the comparable market rate, it varies across intervention methods and changes with the subsidy rate.