Inflation, Investment and Valuation

2021 ◽  
Vol 0 (0) ◽  
Author(s):  
Bradford Cornell ◽  
Richard Gerger ◽  
Gregg A. Jarrell ◽  
James L. Canessa
Keyword(s):  
Steady State ◽  
Cash Flow ◽  
Fiscal Policies ◽  
Proper Treatment ◽  
Discounted Cash Flow ◽  
Constant Rate ◽  
Key Issues ◽  
The Impact ◽  
Discounted Cash Flow Valuation

Abstract In any context where a discounted cash flow valuation is required, there is the issue of estimating the continuing value. The most common way to do that is to assume that by the terminal horizon the company is in a steady state and is growing at a constant rate. The issue is how to handle inflation. The problem is that it is often done wrong and the impact is typically material. Because there remains significant confusion, in this paper we simplify the analysis by isolating the two key issues and providing example calculations. We show that even at the current 2% level proper treatment of inflation has a sizeable impact on valuation. If inflation were to accelerate as a result of current monetary and fiscal policies, the significance of this issue will increase.

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.

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.

scholarly journals VALUE INFLUENCING MECHANISM OF GREEN CERTIFICATES IN THE DISCOUNTED CASH FLOW VALUATION

2014 ◽  
Vol 18 (3) ◽  
pp. 238-252 ◽  
Author(s):  
Jussi Vimpari ◽  
Seppo Junnila
Keyword(s):  
Cash Flow ◽  
Scientific Literature ◽  
Property Value ◽  
Discounted Cash Flow ◽  
Property Valuation ◽  
Valuation Model ◽  
Influencing Mechanism ◽  
Green Certificates ◽  
Industry Professionals ◽  
Discounted Cash Flow Valuation

The market value of green properties is already acknowledged in scientific literature, but it has still remained unclear how green certificates are incorporated into property valuation. In this study, value influencing mechanism of green certificates in property investment is studied. A widely used discounted cash flow (DCF) model for property valuation was constructed and communicated with spreadsheet to industry professionals for valuing an office property in metropolitan Finland. The goal was to understand the value influencing mechanism and even deeper to identify the differences in DCF parameters between certified properties and non-certified properties. The results show that a green certificate increases on average the property value with 9.0% in the DCF valuation model. Improved yield and net rental income were the main reasons for the higher property value. Interestingly, this is the first known study to empirically open the value influencing mechanisms of green properties presented in earlier theoretical studies.

scholarly journals The real options method applied to decision making – an investment analysis

2019 ◽  
Vol 16 (4) ◽  
pp. 562-571 ◽  
Author(s):  
Guilherme Brittes Benitez ◽  
Mateus José do Rêgo Ferreira Lima
Keyword(s):  
Decision Making ◽  
Real Options ◽  
Cash Flow ◽  
Investment Analysis ◽  
Discounted Cash Flow ◽  
The Real ◽  
Managerial Flexibility ◽  
Building Project ◽  
The Impact

Goal: This study aims to assess the impact of using the method of real options in investment analysis through a case study on a retail firm. Design / Methodology / Approach: It was targeted the applications of the real options method in a different type of environment and it was compared to another method more commonly used, the discounted cash flow method (DCF). The implementation and assessment of the real options method was investigated by means of a case study conducted in an investment analysis in a retail units firm. Results: The use of the real options method showed a more concise applicability over the DCF method. The results show that the project’s value, after the inclusion of managerial flexibility, increased significantly, which indicates that the analysis of the discounted cash flow undervalued the investment in question, since it disregarded the flexibility to expand or abandon the project. Limitations of the investigation: The presented method is proper to long-term processes where it is possible to make changes during the project. Investments in this sector usually are more related to short and medium-term decisions, making the application difficult due to the short decision-making period available to the managers. Practical Implications: The study provided the incorporation of flexibility through different pathways during the building project in a retail units firm. It was showed different scenarios where practitioners could decide among expanding, proceeding, reducing or abandoning the retail units based on the characteristics of their investments. Originality/value: The results obtained are an indication of this methodology to industrial businesses that are relatively volatile and that need a certain degree of flexibility in order to burgeon, such as the case of the retailing sector.

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