The definition of Discount Cash Flow is uses of future free cash flow projections and discounts them (most often using the weighted average cost of capital) to arrive at a present value, which is used to evaluate the potential for investment. If the value arrived at through DCF analysis is higher than the current cost of the investment, the opportunity may be a good one. The Discount Cash Flow shows that changes in long-term growth rates have the greatest impact on share valuation. The interest rate changes also make a big difference. . The Discount Cash Flow analysis is more flexible than any other individual ratio it also allows the investor the opportunity to look at the ability of the company to grow.

The Capital Asset Model is an economic model for valuing stocks, bonds, and other assets and relating the risk with the expected return. The Capital Asset Model is based on the premise of the investor will demand risk premium which is simply what they expect to get back, for the additional risk taken. The Capital Asset Model uses a system that divides the portfolio's risk into systematic and specific risk. Systematic risk is the risk of holding the market portfolio. As the market moves, each individual asset is more or less affected. Specific risk is the risk which is unique to an individual asset. It represents the asset returns with general market moves.

References:
www.encycogov.com

Valued based management. net

Chapter 11 - Block, Hirt. (2005). Foundations of financial management (11th ed.). New York: McGraw-Hill.

...
The Capital Asset Pricing Model commonly known as CAPM defines the relationship between risk and the return for individual securities. CAPM was first published by William Sharpe in 1964. CAPM extended “Harry Markowitz’s portfolio theory” to include the notions of specific and systematic risk. CAPM is a very useful tool that has enabled financial analysts or the independent investors to evaluate the risk of a specific investment while...

...CAPMCAPM provides a framework for measuring the systematic risk of an individual security and relate it to the systematic risk of a well-diversified portfolio. The risk of individual securities is measured by β (beta). Thus, the equation for security market line (SML) is:
E(Rj) = Rf + [E(Rm) – Rf] βj
(Equation 1)
Where E(Rj) is the expected return on security j, Rf the risk-free rate of interest, Rm the expected return on the market portfolio and βj the...

...4 Year University vs. Community College
While many times it is not about the grades and getting into college, it is all about the other aspects including money issues, the consideration of maturity and independence and whether or not a major has been determined and selected. Community College and four year Universities are both excellent choices and have their own distinct merits, but are meant for vastly different people. If a person has a pre-determined career path in mind such as a...

...pricing model (CAPM)
Using the Capital Asset Pricing Model, we need to keep three things in mind. 1 there is a basic reward for waiting, the risk free rate. 2 the greater the risk, the greater the expected reward. 3 there is a consisted trade off between risk and reward.
In finance, It is used to determine a theoretically appropriate required rate of return of an asset, if that asset is to be added to an already well-diversified portfolio, given that asset's...

...Is CAPM Beta Dead or Alive? Depends on How you Measure It
Jiri Novak*
* Uppsala University, Sweden E-mail: jiri.novak@fek.uu.se October 2007 Abstract: The CAPM beta is arguably the most common risk factor used in estimating expected stock returns. Despite of its popularity several past studies documented weak (if any) association between CAPM beta and realized stock returns, which led several researchers to proclaim beta “dead”. This paper shows...

...The purpose of DCF-Valuation is to determine the value of a company in terms of its future cash flows. The cash flows are adjusted with certain items (e.g. those not related to company´s core businesses or those with no cash effect) in order to make sure the flows reflect the actually generated cash as good as possible.
This document describes DCF valuation in detail and in our valuation model. If you would like to get an overview of valuation in general or...

...CAPM
1 Calculate the expected return for A Industries which has a beta of 1.75 when the risk free rate is 0.03 and you expect the market return to be 0.11.
2 Calculate the expected return for B Services which has a beta of 0.83 when the risk free rate is 0.05 and you expect the market return to be 0.12.
3 Calculate the expected return for C Inc. which has a beta of 0.8 when the risk free rate is 0.04 and you expect the market return to be 0.12.
4 Calculate the expected...

...estimated to testify that the CAPM works in practice.
The capital asset pricing model (CAPM) provides us with an insight into the relationship between the risk of an asset and its expected return. This relationship serves two significant functions. First, it provides a benchmark rate of return for evaluating possible investments. Second, the model helps us to make an educated guess as to the expected return on asset that have not yet been traded in the...

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