On Comparing Residual Income and Discounted Cash Flow Models of Equity Valuation: A Response to Penman 2001

2001 ◽  
Author(s):  
Russell J. Lundholm ◽  
Terry O'Keefe
Keyword(s):  
Cash Flow ◽  
Residual Income ◽  
Equity Valuation ◽  
Discounted Cash Flow ◽  
Flow Models

On Comparing Residual Income and Discounted Cash Flow Models of Equity Valuation: A Response to Penman 2001 (CAR , Winter 2001)*

2001 ◽  
Vol 18 (4) ◽  
pp. 693-696 ◽  
Author(s):  
Russell J. Lundholm ◽  
Terrence B. O'Keefe
Keyword(s):  
Cash Flow ◽  
Residual Income ◽  
Equity Valuation ◽  
Discounted Cash Flow ◽  
Flow Models

Discounted Cash Flow Method for Valuing International Chemical Distributors

2018 ◽  
Keyword(s):  
Cash Flow ◽  
Discounted Cash Flow ◽  
Case Scenario ◽  
Flow Models ◽  
Flow Method ◽  
Study Approach ◽  
Equity Value ◽  
Multiple Case ◽  
Set Up ◽  
Discounted Cash Flow Method

Do special considerations apply to valuation in the case of large global chemical distributors? This study seeks to identify whether Income-based Discounted Cash Flow method based on projected future income would be suitable to value international chemical distributors. Two- and Three-stage Discounted Cash Flow models will be used. The expected companies’ enterprise and equity value are compared with the existing companies’ valuations. A base, bear and bull case scenario will be set up to establish the range of the company’s value for comparison with the existing valuation. This study adopts a single multiple-case study approach where actual financial data from three of the world’s largest chemical distributors were used to establish the existing companies’ valuation to demonstrate the validity and applicability of the Discounted Cash Flow method for sensitivity analysis.

Discounted Cash Flow Models

2010 ◽  
pp. 329-388
Keyword(s):  
Cash Flow ◽  
Discounted Cash Flow ◽  
Flow Models

Firm valuation: comparing the residual income and discounted cash flow approaches

2002 ◽  
Vol 18 (3) ◽  
pp. 303-318 ◽  
Author(s):  
Thomas Plenborg
Keyword(s):  
Cash Flow ◽  
Firm Valuation ◽  
Residual Income ◽  
Discounted Cash Flow

Do combining value estimates increase valuation accuracy? Evidence from Indian chemical industry

2015 ◽  
Vol 5 (2) ◽  
pp. 170-183 ◽  
Author(s):  
Ranjit Tiwari ◽  
Harish Kumar Singla
Keyword(s):  
Cash Flow ◽  
Chemical Industry ◽  
Residual Income ◽  
Annual Data ◽  
Discounted Cash Flow ◽  
Content Type ◽  
Market Values ◽  
Valuation Model ◽  
Residual Income Model ◽  
Income Model

Purpose – Being a developing nation with huge opportunity of growth prospects the assessment of valuation models becomes important to have a more realistic value estimate. The purpose of this paper is to empirically examine the comparative accuracy and explanatory performance of discounted cash flow (DCF) and residual income model (RIM) valuation models for the Indian chemical industry and come up with a composite valuation model. Design/methodology/approach – To achieve the objective of the study the authors first determine the intrinsic values using both the models. Comparisons of the models are based on prediction errors and the explanatory performance of market value on value estimates. The study uses panel regression to forecast estimates of earnings and measure explanatory performance. The authors examine the ability of the value estimates to explain cross-sectional variation in the observed market values. The study also uses GMM method for deriving robust estimators. Variables for the study are collected from the CMIE’s prowess data base (release 4). The authors consider all 1,075 BSE listed chemical companies for the purpose of the study. The study uses annual data points starting from 31 March 2002 to 31 March 2011. Findings – The comparative framework shows that both Residual Income model and Composite Valuation model are superior to Discounted cash flow model and are equally likely. But since composite value estimates considers all bonafide informations of individual models, the estimates of Composite Valuation model becomes more reliable. Research limitations/implications – The study only compares and combines the two most widely used valuation models around the world. Future studies can be conducted using the third widely used valuation models, i.e. multiples and see the level of accuracy of individuals as well as the composite model. Originality/value – As a concern very few research has been conducted in this area in India. This paper provides practitioners with a snapshot of the applicability of DCF and RIM valuation models. And also shows how a composite value estimate can improve accuracy.

Discounted Cash Flow Models

2017 ◽  
pp. 97-116
Author(s):  
Bente Villadsen ◽  
Michael J. Vilbert ◽  
Dan Harris ◽  
A. Lawrence Kolbe
Keyword(s):  
Cash Flow ◽  
Discounted Cash Flow ◽  
Flow Models
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