scholarly journals Valuation of Equity using Discounted Cash flow Method

2021 ◽  
Vol 23 (3) ◽  
Author(s):  
Mrs.Shailaja Konek ◽  
◽  
Ms.Srilakshmi D ◽  
Keyword(s):  
Cash Flow ◽  
Intrinsic Value ◽  
Free Cash Flow ◽  
Discounted Cash Flow ◽  
Investment Activity ◽  
Flow Method ◽  
Intelligent Decision Making ◽  
True Value ◽  
The Right ◽  
Discounted Cash Flow Method

The growth of any economy depends on the strong financial system. Capital market plays a significant role in channelizing the savings into an investment activity by providing the platform to the investors as well as the firms to raise money. There are various instruments available for investment activities globally. Every investor has an objective to diversify portfolio globally to minimize risk among foreign markets and companies. Investor has to acquire the necessary skills to analyze the stocks to make better investment decisions in order to create wealth maximization. Valuation of equity is pre requisite for intelligent decision making in choosing the right scrip for investment in deciding the true value or intrinsic value of a share. There are few methodologies to evaluate the valuation of stocks such as discounted cash flow method, dividend discounted model. In this backdrop, this paper made an attempt to evaluate the Skyworks Solutions, Inc. stock with free cash flow to equity (FCFE) method of valuation during the 2016 to 2019 and to determine the intrinsic value of the stock and results found to be undervalued.

Providing a Framework for Testing the Reasonableness of Terminal Period Cash Flow Investments

2020 ◽  
Vol 39 (1) ◽  
pp. 5-13
Author(s):  
Joseph Thompson ◽  
David Neuzil
Keyword(s):  
Research And Development ◽  
Cash Flow ◽  
Free Cash Flow ◽  
Working Capital ◽  
Discounted Cash Flow ◽  
Enterprise Value ◽  
Flow Method ◽  
Equity Value ◽  
A Company ◽  
Discounted Cash Flow Method

Whether using the traditional Gordon Growth formula or the value driver formula, it is common for a valuer to neglect testing the reasonableness of the capitalized free cash flow used in determining the terminal value and, therefore, derive a terminal value that is incorrect. This is troubling considering how important the terminal value is when concluding an equity value; the terminal value most often accounts for a majority of the concluded enterprise value when applying the Discounted Cash Flow method. The purpose of this article is to provide a framework for testing the reasonableness of the amount of terminal cash flow that is reinvested to support the operations into perpetuity. In general, there are three potential areas for a company to reinvest into its future operations: (1) net working capital, (2) purchases of property, plant, and equipment (PP&E), and (3) other investments (e.g., research and development [R&D]). Our article provides an overview of a suggested method for analyzing and calculating the appropriate amount of investments in net working capital and PP&E under the Gordon Growth formula. We also provide an example analysis to illustrate potential issues resulting from expensed investments (e.g., R&D) when applying the value driver formula.

scholarly journals Impact of accounting choice of dividends on the company’s value: Initial evidences

2019 ◽  
Vol 38 (2) ◽  
pp. 01-13
Author(s):  
Mariana Titoto Marques ◽  
Bruno José Canassa ◽  
William Aparecido Maciel da Silva ◽  
Jéssica de Morais Lima ◽  
Fabiano Guasti Lima ◽  
...  
Keyword(s):  
Cash Flow ◽  
Free Cash Flow ◽  
Accounting Choice ◽  
Working Capital ◽  
Discounted Cash Flow ◽  
Flow Method ◽  
Accounting Choices ◽  
The Difference ◽  
Accounting Reports ◽  
Discounted Cash Flow Method

The theme "value" always draws attention in discussions because its concept is linked to a high subjectivity. There are many models that try to get to an asset or a company’s value, which in addition to dealing with the subjectivity of the term, also must deal with several projections. The model of free cash flow is quoted in the literature. This method is affected by the variation of working capital which is the difference between assets and liabilities that is considered operational, calculated by Fleuriet’s Model, but to classify as operational is up to the evaluator/analyst. There are many choices for those who prepare the accounting reports too, what is called in the literature as the accounting choices. Example of the accounting choices is the treatment of interest, dividend and interest on shareholders' equity. Thus, if any account is classified as operational, this could impact the calculation of working capital and maybe, the value of a firm. This study analyzed whether there is an impact on the value, calculated by the discounted cash flow method, resulting from the accounting choice of dividends. Starting from the company's cash flow approach, which is affected by working capital, the sample was made by 80 companies in the Bovespa New Market between 2011 and 2015. Based on tests of mean and sign differences, the results confirmed what was expected: the dividend affects the free cash flow calculation and, moreover, should affect the company’s value.

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.

Part III Substantive Rights, 9 Compensation

2017 ◽  
Author(s):  
McLachlan Campbell ◽  
Shore Laurence ◽  
Weiniger Matthew
Keyword(s):  
International Law ◽  
Cash Flow ◽  
Practical Importance ◽  
The State ◽  
Practical Application ◽  
Discounted Cash Flow ◽  
Flow Method ◽  
Monetary Compensation ◽  
Discounted Cash Flow Method

Chapter 9 examines the obligation upon the State committing the international wrong to make reparation through restitution or monetary compensation. It first considers the international law standards of compensation for expropriation before proceeding to discuss the range of options adopted in practice by arbitral tribunals. It then looks at practical application of the main methods of valuation used to determine the appropriate level of compensation, particularly the ‘discounted cash flow’ method, along with the issue of causation in international law. The chapter concludes with an analysis of five topics that are assuming greater practical importance in the approach of arbitral tribunals to remedies: the award of moral damages in exceptional circumstances; the claimant’s duties of mitigation of loss; the potential for the availability of non-pecuniary remedies; interest; and costs.

scholarly journals Synergy evaluation in mergers and acquisitions

2020 ◽  
Vol 19 (2) ◽  
pp. 108-113
Author(s):  
Victoria Bataeva
Keyword(s):  
Mergers And Acquisitions ◽  
Cash Flow ◽  
Synergy Effect ◽  
Discounted Cash Flow ◽  
Flow Method ◽  
Discounted Cash Flow Method

This paper analyzes the M&A deal of Rostelecom and Tele2 Russia in order to evaluate the synergy effect as a result of consolidation. Discounted cash flow method is applied to determine the companies’ enterprise values. As a result of the research, synergy is equal 38 003 million rubles and the M&A deal is recognized as an effective one.

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