"Discounted Cash Flow" Essays and Research Papers

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Discounted Cash Flow

Explain.  Our basic principle of stock valuation is that the value of a share of stock is simply equal to the present value of all of the expected dividends on the stock. According to the dividend growth model, an asset that has no expected cash flows has a value of zero, so if investors are willing to purchase shares of stock in firms that pay no dividends, they evidently expect that the firms will begin paying dividends at some point in the future. 2. Explain why some bond investors are...

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Discounted Cash Flow (Dcf) Analysis

***************************** SAMPLE PAGES FROM TUTORIAL GUIDE ***************************** Table of contents SECTION 1: OVERVIEW DCF in theory and in practice Unlevered vs. levered DCF SECTION 2: MODELING THE DCF Modeling unlevered free cash flows Discounting to reflect stub year and mid-year adjustment Terminal value using growth in perpetuity approach Terminal value using exit multiple approach Calculating net debt Shares outstanding using the treasury stock method Modeling the weighted...

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Cost of Capital Using Discounted Cash Flow Approach

In finance, the discounted cash flow (DCF) analysis is a method of valuing a project, company or asset using the concepts of time value of money (Wikipedia, 2004). Three inputs are required to use the DCF, also called dividend-yield-plus-growth-rate approach, include: the current stock price, the current dividend, and the marginal investor’s expected dividend growth rate. The stock price and the dividend are east to obtain, but the expected growth rate is difficult to estimate (Ehrhardt & Brigham...

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Discounted Cash Flow

in Tables 4.10 and 4.11 do not show free cash flow and financing requirements. These are calculated in Table 1. Note that free cash flow for 2005 is -$2.3 million. But dividends are $2.0, so the company will need 2.3 + 2.0 = $4.3 million in outside equity financing. Table 2 shows that the book value of equity is forecasted to grow from $40.71 million in 2004 to $63.31 million at the end of 2010. Table 3 works out earnings, dividends and free cash flow for 2011. By that time Reeby Sports should...

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Capital Asset Pricing Model (Capm) Versus the Discounted Cash Flows Method

Capital Asset Pricing Model (CAPM) Versus the Discounted Cash Flows Method Managerial Analysis/BUSN 602 Capital asset pricing model or CAPM is a financial model that measures the risk premium inherent in equity investments like common stocks while Discounted Cash Flow or DCF compares the cost of an investment with the present value of future cash flows generated by the investment with the mindset being that if the cash flow is positive, then the investment is good. Generally speaking, CAPM is...

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Cash Flow Analysis

Interco’s valuation as a whole. 2) As stated by the equity analysts, Interco is an over capitalized company with potential to grow, which makes an acquisition easy to finance. 3) Interco is also a cash generative target for a potential acquirer as it generates approximately $0.10 of operating cash flow for every dollar of sales. 4) The company is also structured in a way that it could be broken up and sold into its constituent parts, which could prove to be worth more than the whole. 2. As a member...

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Related Literature to the Cash Flow Management

The role of cash flow information in discriminating between bankrupt and non-bankrupt companies remains a contentious issue. In a number of literature reviews on bankruptcy prediction (e.g. Zavgren, 1983; Jones, 1987; Neill et al. 1991; Watson, 1996) the common view is that cash flow information does not contain significant incremental information content over accrual information in discriminating between bankrupt and non-bankrupt firms. (Divesh S. Sharma, Senior Lecturer, School of Accounting, Banking...

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Eskimo Pie (Stand Alone Value)

income. We decided to evaluate this company based upon two methods: The Discounted Cash Flow Method and the Comparable Companies Method. Discounted Cash Flow Method takes the forecast free cash flows during forecasted horizon. Then we estimate the cost of capital (weighted average cost of capital) and estimate continuing value (value after forecast horizon). The future value is discounted to the present value. We than add back cash ($13 Million) and non-current assets and deduct total debt. With the...

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Weighted Average Cost of Capital: Capital Budgeting Decisions

Be able to explain and calculate the following capital budgeting methods: a. Payback- the number of years that it is required to recover the project’s costs. b. discounted payback- discounts the cash flows at the projects cost of capital. c. net present value (NPV)- Sum of all PV of all cash flows i. NPV=PV inflows –Cost ii. The project should be accepted if the NPV is positive because such a project increases shareholder value. d. internal rate...

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Corporate Finance Mid Semester Test

value of the future cash flows forecasted from this stock (that is all dividends to infinity). These are discounted by the cost of equity. If P 0 is lower that the current stock price, this means the model suggests this stock is overvalued (overpriced) in the market. Hence investors would not buy this stock and the price would/should go down. 2. “Because investors are risk averse, the risk-free interest rate is not the right rate to use when converting risky cash flows across time.” The risk-free...

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