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 Impact of Default on Tax Shield Valuation

2017 ◽  
Vol 12 (1) ◽  
pp. 41-62 ◽  
Author(s):  
Alexander Lahmann ◽  
Sven Arnold ◽  
Philipp Gmehling
Keyword(s):  
Diffusion Process ◽  
Cash Flow ◽  
Cash Flows ◽  
Discounted Cash Flow ◽  
Stochastic Diffusion ◽  
Tax Shield ◽  
Tax Savings ◽  
The Impact ◽  
Future Cash Flows

AbstractIn this paper we develop a model to value debt related tax savings and associated yield rates for debt in a setting where future cash flows are uncertain and follow a stochastic diffusion process. By explicitly modeling a default trigger we find that tax shield values in standard Discounted Cash Flow (DCF) valuation formulas are too high as they do not correctly incorporate the risk of default. Furthermore, we are able to endogenously derive risk-adjusted yield rates, while keeping the overall simple and tractable structure of the DCF approach.

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.

Measuring Wildfire Impacts: Method and Case Study

1987 ◽  
Vol 11 (3) ◽  
pp. 143-147
Author(s):  
W. L. Mills ◽  
S. D. Shnitzler ◽  
R. S. Meldahl
Keyword(s):  
Economic Impact ◽  
Cash Flow ◽  
Flow Model ◽  
Growth And Yield ◽  
Timber Production ◽  
Discounted Cash Flow ◽  
The Impact ◽  
Data Requirements

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.

Reconsidering the Prudential Filter for the Cash Flow Hedge Reserve in View of the Purpose of Banking Regulation

2021 ◽  
Vol 54 (2) ◽  
pp. 265-299
Author(s):  
Alois Paul Knobloch ◽  
Felix Krauß
Keyword(s):  
Cash Flow ◽  
Banking Regulation ◽  
Fair Value ◽  
Cash Flows ◽  
Positive Effects ◽  
Tier 1 ◽  
Value Changes ◽  
The Impact ◽  
Future Cash Flows ◽  
Tier 1 Capital

Common Equity Tier 1 capital of credit institutions is adjusted by the prudential filter for the cash flow hedge reserve according to art. 33(1)(a) CRR. Thereby, fair value changes of hedging instruments, especially of derivatives, are neutralized by imputed fair value changes of future cash flows that are part of a cash flow hedge. However, these future cash flows are (mostly) expected to occur under market conditions and, thus, imputed fair value changes are not reflected in changes of present values derived from real transactions that exist at the time of the regulatory capital calculation. As a result, positive effects on Common Equity Tier 1 capital can be viewed critically in regard to the prudence principle of banking supervision if an initial reduction in Common Equity Tier 1 capital due to losses from hedging instruments is corrected. Furthermore, the adjustment is case specific and depends on the hedge effectiveness, which is questionable because of consistency reasons. To solve these weaknesses, we suggest to eliminate the prudential filter for the cash flow hedge reserve as a whole. This would lead to a better quality of Common Equity Tier 1 capital by improving its loss absorbency and as a side effect to a reduction in complexity enhancing supervision through regulatory authorities and market discipline. Furthermore, we demonstrate the impact that the proposed abolishment of the prudential filter for the cash flow hedge reserve would have on the Common Equity Tier 1 capital ratios of the largest European banks in 2014–2019

scholarly journals KEMAMPUAN LABA UNTUK MEMBERIKAN INFORMASI LABA PERIODE MENDATANG DAN ARUS KAS OPERASI PERIODE MENDATANG SELAMA PERIODE KONVERGENSI IFRS DI INDONESIA

CALYPTRA ◽  
2017 ◽  
Vol 5 (2) ◽  
pp. 196
Author(s):  
Sheila Irawan ◽  
Yie Ke Feliana
Keyword(s):  
Cash Flow ◽  
Stock Exchange ◽  
Cash Flows ◽  
Net Income ◽  
Full Disclosure ◽  
Future Earnings ◽  
Future Cash Flow ◽  
Business Entities ◽  
The Impact ◽  
Future Cash Flows

Abstrak - Penelitian ini bertujuan untuk melihat dampak adopsi IFRS secara bertahap khususnya dalam kemampuan earnings periode ini untuk memberikan informasi future earnings dan future cash flows from operations selama periode konvergensi IFRS di Indonesia dengan membandingkan kemampuan earnings untuk memprediksi future earnings dan future cash flows from operations tiap periode. Penelitian ini menggunakan pendekatan secara kuantitatif dengan badan usaha yang terdaftar di BEI selama periode 2010-2013 sebagai objek penelitian. Jumlah sampel yang digunakan pada penelitian ini adalah 420 badan usaha. Temuan penelitian menunjukkan bahwa tidak ada peningkatan hubungan antara earnings periode berjalan dengan future earnings, namun ada peningkatan hubungan antara earnings periode berjalan dengan future cash flows from operations. Hal ini terjadi karena adopsi IFRS menuntut perusahaan untuk lebih transparan dengan adanya full disclosure, sehingga net income kurang dapat dimanipulasi mengakibatkan earnings yang terjadi periode ini belum tentu berulang di periode selanjutnya yang menyebabkan menurunnya kemampuan untuk memprediksi future earnings, namun meningkatkan kemampuan untuk memprediksi future cash flows from operations karena laba yang terjadi periode tersebut berhubungan erat dengan arus kas dari aktivitas operasional di periode selanjutnya. Kata kunci : Current Earnings, Future Earnings, dan Future Cash Flows from Operations  Abstract – This study aims to look at the impact of the adoption of IFRS gradually, especially the ability of current earnings to provide information about future earnings and future cash flows from operations during the period IFRS convergence in Indonesia by comparing the ability of earnings to predict future earnings and future cash flows from operations of each period. This study uses a quantitative approach to all of the business entity listed on the Stock Exchange during the period 2010-2013 as the research object. The samples used in this study were 420 business entities. The study's findings that there is no increasing relationship between the current earnings and future earnings, but there is an increasing relationship between current earnings and future cash flows from operations. This happens because of the adoption of IFRS requires companies to be more transparent with their full disclosure, so net income is less manipulated, it makes earnings that occurred this period may not be repeated in the next period which led to a decreased ability to predict future earnings, but improving the ability of current earanings to predict future cash flows from operations because current earnings are more closely related to future cash flow from operating activities. Keywords : Current Earnings, Future Earnings, and Future Cash Flows from Operations

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.

scholarly journals Study on Companies from the Energy Sector from the Perspective of Performance through the Operating Cash Flow

Energies ◽  
2021 ◽  
Vol 14 (12) ◽  
pp. 3667
Author(s):  
Claudia Diana Sabău-Popa ◽  
Luminița Rus ◽  
Dana Simona Gherai ◽  
Codruța Mare ◽  
Ioan Gheorghe Țara
Keyword(s):  
Labor Productivity ◽  
Cash Flow ◽  
Stock Exchange ◽  
Average Duration ◽  
Significant Negative Correlation ◽  
Cash Flows ◽  
Energy Sector ◽  
Or Management ◽  
Operating Cash Flow ◽  
The Impact

In this paper we analyzed the link between companies’ performance, in terms of cash and income, and the labor productivity or management rates, in case of the companies from the energy sector listed on the Bucharest Stock Exchange. We focused on the energy sector because of the impact that its expansion has on the evolution of economies around the world and because of its dynamics in the sense of gradually shifting to the use of energy from renewable sources. We have used panel regression models to analyze the operating cash flow and the profitability rates and the determination of a causal or dependency relationship with labor productivity or management rates. The results of this study show a significant negative correlation between operating cash flows and the average duration of stock rotation, and no correlation between productivity and the operating cash flow. Instead, the average duration of stock turnover does not at all influence the profitability rates, and productivity is always significant for the return on assets, ie forthe return on equitywith a positive coefficient, as expected. The gap between the average duration of payment of suppliers and the average duration of receivables does not significantly influence neither the cash flow nor the rates of return.

scholarly journals Financial optimisation of the scheduling for the multi-stage project

2017 ◽  
Vol 65 (6) ◽  
pp. 899-908
Author(s):  
M. Klimek ◽  
P. Łebkowski
Keyword(s):  
Simulated Annealing ◽  
Cash Flow ◽  
Project Scheduling ◽  
Simulated Annealing Algorithm ◽  
Cash Flows ◽  
Standard Test ◽  
Resource Constrained ◽  
Discounted Cash Flow ◽  
Multi Stage ◽  
Annealing Algorithm

AbstractThe paper analyses the problem of discounted cash flow maximising for the resource-constrained project scheduling from the project contractor’s perspective. Financial optimisation for the multi-stage project is considered. Cash outflows are the contactor’s expenses related to activity execution. Cash inflows are the client’s payments for the completed milestones. To solve the problem, the procedure of backward scheduling taking into account contractual milestones is proposed. The effectiveness of this procedure, as used to generate solutions for the simulated annealing algorithm, is verified with use of standard test instances with additionally defined cash flows and contractual milestones.

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