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 theoretical analysis of the matching of assets to liabilities

1984 ◽  
Vol 111 (2) ◽  
pp. 375-402 ◽  
Author(s):  
A. J. Wise
Keyword(s):  
Theoretical Analysis ◽  
Mathematical Analysis ◽  
Cash Flows ◽  
Insurance Contract ◽  
Pension Scheme ◽  
The Future ◽  
The Subject ◽  
The Given ◽  
Future Cash Flows

1.1. This paper is supplementary to another by the same author on the subject of matching. It describes the mathematical analysis of the following problem.1.2. We are given:1. a pattern of expected future cash flows under a pension scheme or insurance contract;2. a set of investments available for purchase; and3. a model of the future behaviour of investment conditions.What set or sets of available investments would provide the best match against the given liabilities in order to minimize any likely surplus or deficiency on completion of the liability cash flows?

scholarly journals Operating Cash Flows, Cash Recovery Rates And Internal Rates Of Return

2010 ◽  
Vol 8 (8) ◽  
Author(s):  
Christine Andrews ◽  
Joseph C. Rue ◽  
Ara Volkan
Keyword(s):  
Financial Reporting ◽  
Stock Price ◽  
Market Price ◽  
Cash Flows ◽  
Financial Accounting ◽  
Sufficient Information ◽  
Financial Accounting Standards Board ◽  
Historical Cost ◽  
Value Stocks ◽  
Future Cash Flows

<p class="MsoNormal" style="text-align: justify; line-height: normal; margin: 0in 0.5in 0pt; mso-pagination: none;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; color: black; font-size: 10pt; mso-themecolor: text1;">Investors depend on financial reporting to assess the amounts and timing of future cash flows. Unfortunately, the historical cost basis may not provide sufficient information to judge future cash flows. The Financial Accounting Standards Board argues that the market price of common stock incorporates the market estimate of discounted future cash flows. This paper illustrates the calculation of operating cash flow on a per share (CFPS) basis and measures a firm&rsquo;s internal rate of return by dividing the CFPS by the beginning of the year stock price reported by the Dow Jones Industrials. Although this measure may be affected by other market events, we believe it has potential information content and may provide investors with a tool to value stocks.</span></p>

scholarly journals Investor Reaction to the Discovery of Accounting Fraud: The Period from the Discovery of the Fraud to the Completion of the Correction

2021 ◽  
Vol 10 (6) ◽  
pp. 171
Author(s):  
Syed Raziuddin Ahmad ◽  
Nabil Ahmed Mareai Senan ◽  
Ijaz Ali ◽  
Kashif Ali ◽  
Imran Ahmad Khan ◽  
...  
Keyword(s):  
Stock Price ◽  
Cash Flows ◽  
Accounting Fraud ◽  
News Release ◽  
Price Decline ◽  
Release Of Information ◽  
Future Cash Flows ◽  
Investor Reaction

This paper examines the period from the discovery of accounting fraud to the completion of correction and examines the reaction of investors on the date of the first news release suggesting accounting manipulation, the date of the subsequent release of information related to the amount of profit correction that was not disclosed on the date of the first news release, and the date of the submission of the correction report. The verification results show that the stock price falls sharply on the day of the first news release and the day when the information about the amount of profit revision is disclosed, that when the amount of profit revision is large and it takes time to disclose information about the amount of profit revision, there is a rebound in the stock price on the day when the correction report is submitted because investors like the resolution of uncertainty, and that there is a relationship between the amount of profit revision and the size of stock price decline. However, when there is no information about the amount of correction on the first day of the news release, investors react uniformly, and the reaction to a large (small) amount of correction is underreaction (overreaction). These results indicate that investors were misled by the misstatements until the fraud was discovered and made decisions based on overestimates of future cash flows, so they suffered unexpected losses when the fraud was discovered, and during the period from the fraud discovery to the completion of correction.   Received: 3 August 2021 / Accepted: 6 October 2021 / Published: 5 November 2021

Does Foreign Investor Consider the Future Cash-flows when Investment?

2020 ◽  
Vol 20 (2) ◽  
pp. 43-64
Author(s):  
Bahlgeun Roh ◽  
Myeongjeon Oh ◽  
Jaehong Lee
Keyword(s):  
Cash Flows ◽  
Foreign Investor ◽  
The Future ◽  
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.

The Financial Implications of In-Substance Defeasance

1987 ◽  
Vol 2 (1) ◽  
pp. 79-89 ◽  
Author(s):  
Peyton Foster Roden
Keyword(s):  
Interest Rates ◽  
Stock Price ◽  
Cash Flows ◽  
Financial Accounting ◽  
Financial Accounting Standards Board ◽  
Corporate Managers ◽  
Earnings Per Share ◽  
Equity Ratio ◽  
Reported Earnings ◽  
Future Cash Flows

In November 1983, the Financial Accounting Standards Board issued Statement No. 76, Extinguishment of Debt. The Statement permits corporations completing an in-substance defeasance to recognize an increase in earnings and earnings per share. High interest rates in 1984 and the Statement encouraged corporate managers to defease debt in substance and to show the associated increase in earnings per share. The financial impact contrasts with those of accounting. Although in-substance defeasance leads to an increase in reported earnings, financial theory suggests that it leads to a decrease in the price of the defeasing corporation's common stock by doing the following: decreasing the amount of future cash flows, decreasing corporate liquidity, redistributing wealth from common shareholders to bondholders, and decreasing the debt-equity ratio. Only the change in the debt-equity ratio may lead to an expected increase in stock price. The other three influences lead to an expected decrease.

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.

Life annuities of compulsory savings and income adequacy of the elderly in Singapore

2003 ◽  
Vol 2 (1) ◽  
pp. 41-65 ◽  
Author(s):  
NGEE CHOON CHIA ◽  
ALBERT K. C. TSUI
Keyword(s):  
The Elderly ◽  
Cash Flows ◽  
Medical Expense ◽  
Income Adequacy ◽  
The Future ◽  
Single Premium ◽  
Future Consumption ◽  
Life Annuities ◽  
Deferred Annuity ◽  
Future Cash Flows

Singapore has a publicly managed central provident fund (CPF) system, which is compulsory and based on individual accounts with an explicit link between contribution and benefits. This paper assesses the adequacy of the CPF saving to meet the retirement needs of the elderly in Singapore. Instead of emphasizing the mechanism of accumulation, we focus on the expenditure side of the lifetime budget of the elderly and estimate the present value of retirement consumption (PVRC). The estimated PVRC is obtained by simulations through three major components: calibration of subsistence and medical expenses of the elderly; forecast of cohort survival probability by age and by sex; and generation of yield curves to discount the future cash flows. Our results indicate that the existing CPF-decreed minimum sum is inadequate to meet the future consumption needs of the female elderly. The inadequacy becomes more severe when medical expense is set at higher growth rates. Moreover, the monthly payouts of a single premium deferred annuity are computed as illustrative examples.

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).

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