An Application of Regressed Discounted Cash Flow as an Automated Valuation Method: A Case in Bari

2017 ◽  
pp. 345-359
Author(s):  
Maurizio d’Amato ◽  
Yener Coskun
Keyword(s):  
Cash Flow ◽  
Discounted Cash Flow ◽  
Valuation Method ◽  
Automated Valuation

scholarly journals To Iterate Or Not To Iterate? Using The WACC In Equity Valuation

2011 ◽  
Vol 9 (11) ◽  
pp. 29 ◽  
Author(s):  
Patrick J. Larkin
Keyword(s):  
Cash Flow ◽  
Firm Value ◽  
Iterative Procedure ◽  
Capital Budgeting ◽  
Cash Flows ◽  
Debt Ratio ◽  
Discounted Cash Flow ◽  
Valuation Method ◽  
Equity Value ◽  
Current Value

The textbook discounted cash flow (DCF) valuation method involves estimating a target debt ratio for the firm, discounting firm cash flows at the WACC to estimate firm value, then subtracting the current value of debt to get equity value. This method gives the correct equity value in situations in which the firm will move toward the target debt ratio after the transaction is complete, such as takeovers and capital budgeting projects. The textbook method does not work well for estimating equity value in passive investments in which leverage is unlikely to change as a result of the potential transaction. Estimating equity value in passive investments when leverage is unlikely to change requires a simple iterative procedure to correct for circularity, which is demonstrated here. This situation sows confusion among students and practitioners. Finance scholars and textbook authors are aware of the situation but the author has never seen it clearly explained in prior textbooks or articles.

scholarly journals Stock Valuation in Pharmaceutical Sub-Sector Companies using the Discounted Cash Flow and Relative Valuation Methods in the 2013-2020 Period

2021 ◽  
pp. 167-176
Author(s):  
Afna Dalilah ◽  
Riko Hendrawan
Keyword(s):  
Cash Flow ◽  
Stock Exchange ◽  
Fair Value ◽  
Free Cash Flow ◽  
Discounted Cash Flow ◽  
Stock Valuation ◽  
Industry Growth ◽  
Valuation Method ◽  
Pessimistic Scenario ◽  
Relative Valuation

This research aims at calculating the fair value of shares of pharmaceutical companies listed on the Indonesia Stock Exchange (IDX). The data used in this research is historical data from the 2013-2020 financial statements, which are used as the basis for projections in 2021-2025. The method used in this research is Discounted Cash Flow (DCF) method with Free Cash Flow to the Firm (FCFF) approach and Relative Valuation method with Price to Earning Ratio (PER) and Price to Book Value (PBV) approaches in three scenarios. The three scenarios used are the optimistic scenario (condition above industry growth), the moderate scenario (the most likely condition for the company), and the pessimistic scenario (the average condition of the industry). The results of the research showed that by using the DCF-FCFF method, KAEF and PYFA stocks experienced overvalued conditions in all scenarios. Meanwhile, KLBF and DVLA stocks were undervalued in all scenarios. Then, from the calculation of the Relative Valuation method, each company was still within the industry range in all scenarios. Overall, KAEF stocks were overvalued by 57.817%, KLBF stocks were undervalued by 7.879%, DVLA stocks were undervalued by 370.865%, and PYFA stocks were overvalued by 16.662% both in DCF method and in Relative Valuation method.

scholarly journals Stock Valuation using Discounted Cash Flow Method with Free Cash Flow to Equity and Relative Valuation Approaches on State-Owned Banks Listed on IDX for 2021 to 2025 Period Projection

2021 ◽  
pp. 191-201
Author(s):  
Almirah Jumran ◽  
Riko Hendrawan
Keyword(s):  
Cash Flow ◽  
Stock Prices ◽  
Intrinsic Value ◽  
Free Cash Flow ◽  
Regulatory Capital ◽  
Discounted Cash Flow ◽  
Industry Growth ◽  
Valuation Method ◽  
Price Earnings Ratio ◽  
Relative Valuation

This study aims to project the intrinsic value of state-owned banks listed on IDX for the 2021 to 2025 projection. This study uses the Discounted Cash Flow (DCF) method with the Free Cash Flow to Equity (FCFE) approach specifically for banks by looking at the regulatory capital. Meanwhile, it is also used the Relative Valuation method with the Price to Book Value (PBV) and Price Earnings Ratio (PER) approaches. This study uses three scenarios will be used, which consist of a pessimistic scenario (the average condition of the industry), a moderate scenario (the same condition as the company's growth), and an optimistic scenario (a condition above industry growth), which aims to project the stock value over the next five years. The data used in this study comes from historical data during the 2016 to 2020 period. Based on the results, the stock prices of state-owned banks using the FCFE method shows undervalued results for all scenarios. Meanwhile, using the relative valuation method, PBV in the optimistic scenario only shows BBNI undervalued conditions. In addition, in moderate and pessimistic scenarios, only BBRI shows overvalued conditions. Furthermore, PER shows undervalued results for all scenarios.

scholarly journals How to Perform Discounted Cash Flow Valuation?

2011 ◽  
Vol 3 (1) ◽  
pp. 81-96 ◽  
Author(s):  
Sławomir Janiszewski
Keyword(s):  
Mergers And Acquisitions ◽  
Cash Flow ◽  
Practical Knowledge ◽  
Discounted Cash Flow ◽  
Global Capital ◽  
Professional Experiences ◽  
Knowledge Based ◽  
Valuation Method ◽  
Company Valuation ◽  
Discounted Cash Flow Valuation

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.

AN HISTORICAL PERSPECTIVE OF NET PRESENT VALUE AND EQUIVALENT ANNUAL COST

1982 ◽  
Vol 9 (1) ◽  
pp. 103-110 ◽  
Author(s):  
Thomas W. Jones ◽  
David Smith
Keyword(s):  
Cash Flow ◽  
Annual Cost ◽  
Historical Development ◽  
Historical Perspective ◽  
Net Present Value ◽  
Present Value ◽  
Discounted Cash Flow

Net present value and equivalent annual cost are two discounted cash flow criteria for comparing investment proposals. Why have accountants taken to net present value? Why do engineers readily use equivalent annual cost? This paper investigates the historical development of these principles to provide an explanation of why this is so.

SFAS No. 123 Disclosures and Discounted Cash Flow Valuation

2000 ◽  
Vol 14 (2) ◽  
pp. 169-189 ◽  
Author(s):  
Leonard C. Soffer
Keyword(s):  
Cash Flow ◽  
Stock Options ◽  
Stock Option ◽  
Financial Statement ◽  
Employee Stock Options ◽  
Financial Statement Analysis ◽  
Discounted Cash Flow ◽  
Employee Stock Option ◽  
Valuation Technique ◽  
Discounted Cash Flow Valuation

One of the cornerstones of financial statement analysis is the discounted cash flow valuation. Despite the broad use of this valuation technique, and the economic importance of employee stock options to firm values, there is little guidance on how employee stock options should be incorporated in a valuation. This paper provides a comprehensive approach to doing so, including consideration of the income tax implications of option exercises, the simultaneity of equity and option valuation, and the use of the disclosures that were mandated recently by Statement of Financial Accounting Standards No. 123. The paper provides a comprehensive example using Microsoft's fiscal 1997 financial statements and employee stock option disclosure. This paper should be of interest to academics and practitioners involved in corporate valuation and financial statement analysis.

On the Pricing of Mandatory DCF Disclosures: Evidence from Oil and Gas Royalty Trusts

2015 ◽  
Vol 90 (6) ◽  
pp. 2449-2482 ◽  
Author(s):  
Panos N. Patatoukas ◽  
Richard G. Sloan ◽  
Jenny Zha
Keyword(s):  
Cash Flow ◽  
Stock Price ◽  
Oil And Gas ◽  
Cost Accounting ◽  
Data Availability ◽  
Discounted Cash Flow ◽  
Historical Cost ◽  
Security Valuation ◽  
Accounting Expertise ◽  
Historical Cost Accounting

ABSTRACT We identify a setting in which firms are required to disclose discounted cash flow (DCF) estimates relating to the value of their primary assets. ASC 932 (formerly SFAS No. 69) has mandated DCF disclosures for proved oil and gas reserves since 1982, and these reserves constitute the primary assets of oil and gas royalty trusts. For a hand-collected sample of oil and gas royalty trusts, we find that (1) the mandatory DCF disclosures are incrementally value-relevant over historical cost accounting variables, (2) investors misprice royalty trust units because they underweight the disclosed DCF estimates when forecasting future distributions, and (3) media articles bringing attention to discrepancies between price and the disclosed DCF estimates are significant stock price catalysts. While our evidence indicates that mandatory DCF disclosures can be incrementally useful for security valuation, it also indicates that investors may overlook such information, potentially due to lack of attention and accounting expertise. Data Availability: Data are publicly available from sources indicated in the text.

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