scholarly journals Calculating the Present Value of An Asset's Future Cash Flows

10.3386/w0268 ◽  
1978 ◽  
Author(s):  
Stephen Nadauld
Keyword(s):  
Cash Flows ◽  
Present Value ◽  
Future Cash Flows

How the Equity Terminal Value Influences the Value of the Firm?

2017 ◽  
Vol 13 (1) ◽  
Author(s):  
Alfonso A. Rojo-Ramírez ◽  
Maria J. Martínez-Romero ◽  
Teresa Mariño-Garrido
Keyword(s):  
Cash Flow ◽  
Flow Model ◽  
Intrinsic Value ◽  
Cash Flows ◽  
Common Stock ◽  
Present Value ◽  
Discounted Cash Flow ◽  
Valuation Model ◽  
The Impact ◽  
Future Cash Flows

AbstractThe discounted cash flow model (DCFM) views the intrinsic value of common stock as the present value of its expected future cash flows. This paper analyses whether the equity terminal value (EqTV) of the firm calculated by fundamentals is appreciated by the market. It also studies the impact of variations in EqTV and the extent to which the market perceives these variations. Using a sample of 62 Spanish listed companies, this paper shows that EqTV and its variations are positively and significantly correlated with EqTV assigned by the market and its corresponding variations. It therefore corroborates the validity and relevance of the valuation model.

scholarly journals The Cost to Firms of Cooking the Books

2008 ◽  
Vol 43 (3) ◽  
pp. 581-611 ◽  
Author(s):  
Jonathan M. Karpoff ◽  
D. Scott Lee ◽  
Gerald S. Martin
Keyword(s):  
Regulatory System ◽  
Cash Flows ◽  
Point Estimate ◽  
Present Value ◽  
Implicit Contracts ◽  
Financing Costs ◽  
Widespread Belief ◽  
The Cost ◽  
Future Cash Flows ◽  
Additional Loss

AbstractWe examine the penalties imposed on the 585 firms targeted by SEC enforcement actions for financial misrepresentation from 1978–2002, which we track through November 15, 2005. The penalties imposed on firms through the legal system average only $23.5 million per firm. The penalties imposed by the market, in contrast, are huge. Our point estimate of the reputational penalty—which we define as the expected loss in the present value of future cash flows due to lower sales and higher contracting and financing costs—is over 7.5 times the sum of all penalties imposed through the legal and regulatory system. For each dollar that a firm misleadingly inflates its market value, on average, it loses this dollar when its misconduct is revealed, plus an additional $3.08. Of this additional loss, $0.36 is due to expected legal penalties and $2.71 is due to lost reputation. In firms that survive the enforcement process, lost reputation is even greater at $3.83. In the cross section, the reputation loss is positively related to measures of the firm's reliance on implicit contracts. This evidence belies a widespread belief that financial misrepresentation is disciplined lightly. To the contrary, reputation losses impose substantial penalties for cooking the books.

scholarly journals The Financial Valuation Risk in Pepper Production: The Use of Decoupled Net Present Value

Mathematics ◽  
2020 ◽  
Vol 9 (1) ◽  
pp. 13
Author(s):  
Josefa López-Marín ◽  
Amparo Gálvez ◽  
Francisco M. del Amor ◽  
Jose M. Brotons
Keyword(s):  
Interest Rates ◽  
Risk Evaluation ◽  
Net Present Value ◽  
Cash Flows ◽  
Present Value ◽  
Financial Valuation ◽  
Production Activity ◽  
Quality Water ◽  
Future Cash Flows ◽  
Over Time

Greenhouse peppers are one of the most important crops globally. However, as in any production activity, especially agricultural, they are subject to important risk factors such as price fluctuations, pests, or the use of bad quality water. This article aims to evaluate the viability of these types of crops by using discounted cash flows. Risk evaluation has been carried out through the analysis of pepper plantations for 2016 and 2017. The traditional application of this tool has significant limitations, such as the discount rate to be used or the estimation of future cash flows. However, by using discount functions that decrease over time in combination with decoupled net present value, these limitations are expected to improve. The use of decoupled net present value has permitted an increase in the accuracy and quantification of risks, isolating the main risks such as price drops (EUR 3720 ha−1 year−1) and structural risks (EUR 1622 € ha−1 year−1). The use of decreasing discount functions has permitted a more realistic investment estimation. Finally, the sensitivity analysis shows that decoupled net present value (DNPV) is little affected by changes in interest rates in contrast to traditional net present value (NPV).

Valuation of the Firm in the Presence of Temporary Book-Tax Differences: The Role of Deferred Tax Assets and Liabilities

2000 ◽  
Vol 75 (1) ◽  
pp. 1-12 ◽  
Author(s):  
David A. Guenther ◽  
Richard C. Sansing
Keyword(s):  
Financial Reporting ◽  
Market Value ◽  
Cash Flows ◽  
Present Value ◽  
Deferred Tax Assets ◽  
Tax Deductions ◽  
Deferred Tax Liabilities ◽  
Deferred Tax ◽  
Future Cash Flows

This study uses an analytical model to investigate the value of the firm when there are temporary differences between when revenue and expense items are recognized for tax- and financial-reporting purposes. The model shows that deferred tax assets and liabilities transform book values of underlying liabilities and assets into estimates of the after-tax cash flows on which the firm's market value is based. The analysis shows that if tax deductions are taken on a cash basis, and if the underlying assets and liabilities are recorded at the present value of their associated future cash flows, then the value of deferred tax assets and deferred tax liabilities is their recorded amount, regardless of when the asset will be realized or when the liability will reverse. If tax deductions are not taken when the expenditure is made (e.g., depreciation) or if underlying assets and liabilities are recorded at more than the present value of their associated future cash flows (e.g., warranty liabilities), then the market value of deferred tax assets and deferred tax liabilities is less than their recorded values. The value of the deferred tax account is independent of when that account will reverse.

Anomalies: Parimutuel Betting Markets: Racetracks and Lotteries

1988 ◽  
Vol 2 (2) ◽  
pp. 161-174 ◽  
Author(s):  
Richard H Thaler ◽  
William T Ziemba
Keyword(s):  
Stock Market ◽  
Market Efficiency ◽  
Empirical Research ◽  
Stock Markets ◽  
Cash Flows ◽  
Present Value ◽  
Betting Markets ◽  
Future Cash Flows ◽  
Termination Point ◽  
Parimutuel Betting

Economists have given great attention to stock markets in their efforts to test the concepts of market efficiency and rationality. Yet wagering markets are, in one key respect, better suited for testing market efficiency and rationality. The advantage of wagering markets is that each asset (bet) has a well-defined termination point at which its value becomes certain. The absence of this property is one of the factors that has made it so difficult to test for rationality in the stock market. Since a stock is infinitely lived, its value today depends both on the present value of future cash flows and on the price someone will pay for the security tomorrow. Indeed, one can argue that wagering markets have a better chance of being efficient because the conditions (quick, repeated feedback) are those which usually facilitate learning. However, empirical research has uncovered several interesting anomalies. While there are numerous types of wagering markets, legal and otherwise, this column will concentrate on racetrack betting and lotto-type lottery games.

scholarly journals Stock Valuation: Dividend Discount Models

2011 ◽  
Author(s):  
Syrgak Kydyraliev ◽  
Anarkül Urdaletova
Keyword(s):  
Stock Price ◽  
Supply And Demand ◽  
Cash Flows ◽  
Securities Market ◽  
Present Value ◽  
Stock Valuation ◽  
Stock Value ◽  
The Future ◽  
Definition Of ◽  
Future Cash Flows

One of the most widespread problems on a securities market is the problem of definition of an estimated stock value. It is necessary to note, that the stock price as well as the price of any good in the market is defined as the result of supply and demand interaction. Our task is to offer the mechanism, which allows making decision on purchase or sale. For this purpose the method of asset estimation by future cash flows will be used – i.e. we believe that the estimated value of an asset is equal to present value of the future cash flows which are provided by the asset. In our paper we will introduce methods for the valuation of stocks with arithmetic and pseudo-arithmetic growth of dividends.

A POSSIBILISTIC APPROACH TO INVESTMENT DECISION MAKING

2013 ◽  
Vol 21 (02) ◽  
pp. 201-221 ◽  
Author(s):  
LUCA ANZILLI
Keyword(s):  
Net Present Value ◽  
Fuzzy Numbers ◽  
Investment Decision ◽  
Investment Decisions ◽  
Cash Flows ◽  
Mean Value ◽  
Present Value ◽  
Adaptive Fuzzy ◽  
Investment Decision Making ◽  
Future Cash Flows

The concept of possibilistic mean value and variance of fuzzy numbers has been applied to investment decisions by using a nonlinear type of fuzzy numbers called adaptive fuzzy numbers. In this paper, by extending the notion of adaptive fuzzy number, we propose a more flexible methodology. Our aim is to allow decision maker more flexibility in dealing with ambiguity and uncertainty. To illustrate the use of our approach and its ability in dealing with ambiguity and imprecision we analyze, as an application, the fuzzy net present value of future cash flows and give some numerical results.

scholarly journals "What If" Analyses in Investment Decision Making

2012 ◽  
Vol 3 (3) ◽  
pp. 5-16
Author(s):  
Katarína Belanová
Keyword(s):  
Decision Making ◽  
Cash Flow ◽  
Net Present Value ◽  
Investment Decision ◽  
Cash Flows ◽  
Present Value ◽  
Discounted Cash Flow ◽  
Basic Approach ◽  
Investment Decision Making ◽  
Future Cash Flows

In general, each project`s value is estimated using a discounted cash flow (DCF) valuation, and the opportunity with the highest value, as measured by the resultant net present value (NPV) will be selected. The problem with such NPV estimates is that they depend on projected future cash flows. If there are errors in those projections, then estimated net present values can be misleading (a forecasting risk). Basic approach to evaluating cash flow and NPV estimates involves asking “what – if” questions. Accordingly, the paper discusses some organized way s of going about a what – if analysis. Its goal in doing so is to assess the degree of forecasting risk and to identify those elements that are the most critical to the success or failure of an investment. However, as we show in examples, as well as in the practical study, though what – if analysis really allows us to obtain the certain idea of degree of forecasting risk, it does not tell us what to do about the possible errors.

scholarly journals The role of the theory of real choices in the development of financial managers and their decisions in the evaluation of investment decisions

2015 ◽  
Vol 1 (3) ◽  
pp. 278
Author(s):  
Ammar Shihab Ahmed
Keyword(s):  
Real Options ◽  
Net Present Value ◽  
Investment Decisions ◽  
Cash Flows ◽  
Traditional Theory ◽  
Present Value ◽  
Real Options Theory ◽  
Capital Budget ◽  
New Variables ◽  
Future Cash Flows

According to traditional theory of the capital budget, the net present value of future cash flows of the project are discounted at an appropriate discount reflects the degree of volatility in expected future cash flows. If the net present value is positive accept the project and vice versa. And also do not show the actions that can be taken after the acceptance of the project and the commencement of work that could result in an increase or decrease of cash flows, and here highlights the shortcomings with the current environment variables that are complex, leading to a search for new methods in line with these new variables and of the theory real options to evaluate investment decisions and that gives a big role Skilled managers in making capital decisions, which is reflected in the cash flows of investment decisions and future reduction of risk, hence requiring real options theory enjoy CFOs high skills in order to maximize the company to which they belong value, so the company's skilled management is an important tributary of the success of companies that are looking for the competitive advantage that achieve the company's goals and the reduction of risk and the resulting Allatakd and of cash flows that you get as a result of the decisions of its managers.

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