Discounted Cash Flow

1. Discounted Cash Flow https://store.theartofservice.com/the-discounted-cash-flow-toolkit.html

2. Mergers and acquisitions - Business valuation • discounted cash flow (DCF) valuation https://store.theartofservice.com/the-discounted-cash-flow-toolkit.html

3. Business value - Philosophy • While it would be very desirable to translate all forms of business value to a single economic measure (e.g., discounted cash flow), many practitioners and theorists believe this is either not feasible or theoretically impossible. Therefore, advocates of business value believe that the best approach is to measure and manage multiple forms of value as they apply to each stakeholder group. https://store.theartofservice.com/the-discounted-cash-flow-toolkit.html

4. Business value - Shareholder Value • For a privately held company, the value of the firm after debt must be estimated using one of several valuation methods, s.a. discounted cash flow or others. https://store.theartofservice.com/the-discounted-cash-flow-toolkit.html

5. Ant colony optimization - Others • *Discounted cash flows in project schedulingW. N. Chen, J. ZHANG and H. Chung, Optimizing Discounted Cash Flows in Project Scheduling--An Ant Colony Optimization Approach, IEEE Transactions on Systems, Man, and Cybernetics--Part C: Applications and Reviews Vol.40 No.5 pp.64-77, Jan. 2010. https://store.theartofservice.com/the-discounted-cash-flow-toolkit.html

6. Valuation (finance) - Valuation overview • #Absolute value models that determine the present value of an asset's expected future cash flows. These kinds of models take two general forms: multi-period models such as discounted cash flow models or single-period models such as the Gordon model. These models rely on mathematics rather than price observation. https://store.theartofservice.com/the-discounted-cash-flow-toolkit.html

7. Valuation (finance) - Business valuation • For a Valuation using discounted cash flows|valuation using the discounted cash flow method, one first estimates the future cash flows from the investment and then estimates a reasonable discount rate after considering the riskiness of those cash flows and interest rates in the capital markets. Next, one makes a calculation to compute the present value of the future cash flows. https://store.theartofservice.com/the-discounted-cash-flow-toolkit.html

8. Valuation (finance) - Net asset value method • This method can also be used to value heterogeneous portfolios of investments, as well as nonprofits, for which discounted cash flow analysis is not relevant https://store.theartofservice.com/the-discounted-cash-flow-toolkit.html

9. Levelised energy cost - Cost factors • To evaluate the total cost of production of electricity, the streams of costs are converted to a net present value using the time value of money. These costs are all brought together using discounted cash flow. https://store.theartofservice.com/the-discounted-cash-flow-toolkit.html

10. Fossil-fuel power station - Relative cost by generation source • These costs occur over the 30–50 year life of the fossil fuel power plants, using discounted cash flows. In general large fossil plants are attractive due to their low initial capital costs—typically around £750–£1000 per kilowatt electrical compared to perhaps £1500 per kilowatt for onshore wind. https://store.theartofservice.com/the-discounted-cash-flow-toolkit.html

11. Economics of new nuclear power plants - Capital costs • The discounted cash flow|discount rate chosen to cost a nuclear power plant's capital over its lifetime is arguably the most sensitive parameter to overall costs. https://store.theartofservice.com/the-discounted-cash-flow-toolkit.html

12. Patent valuation - Income-based method • # Discounted cash flow method: This method aims to estimate future cash flows, which are projected and after discounted by applying an appropriate discount factor. The main source of information to estimate the cash flows is generally the business plan of the company that exploits or intends to exploit the asset. https://store.theartofservice.com/the-discounted-cash-flow-toolkit.html

13. ILUC - EPA Renewable Fuel Standard • EPA's draft analysis stated that ILUC can produce significant near-term GHG emissions due to land conversion, but that biofuels can pay these back over subsequent years. EPA highlighted two scenarios, varying the time horizon and the discounted cash flow|discount rate for valuing emissions. The first assumed a 30 year time period uses a 0 percent discount rate (valuing emissions equally regardless of timing). The second scenario used a 100 year time period and a 2% discount rate. https://store.theartofservice.com/the-discounted-cash-flow-toolkit.html

14. Internal rate of return • It is also called the discounted cash flow rate of return (DCFROR).Project Economics and Decision Analysis, Volume I: Deterministic Models, M.A.Main, Page 269 In the context of savings and loans the IRR is also called the effective interest rate https://store.theartofservice.com/the-discounted-cash-flow-toolkit.html

15. Internal rate of return - Problems with using internal rate of return • Since IRR does not consider cost of capital, it should not be used to compare projects of different duration. Modified Internal Rate of Return (MIRR) does consider cost of capital and provides a better indication of a project's efficiency in contributing to the firm's discounted cash flow. https://store.theartofservice.com/the-discounted-cash-flow-toolkit.html

16. Outline of finance - Fundamental financial concepts • ** Discounted cash flow https://store.theartofservice.com/the-discounted-cash-flow-toolkit.html

17. Net present value • NPV is a central tool in discounted cash flow (DCF) analysis and is a standard method for using the time value of money to appraise long-term projects https://store.theartofservice.com/the-discounted-cash-flow-toolkit.html

18. Stock valuation - Fundamental criteria (fair value) • The most theoretically sound 'stock valuation method', called income valuation or the discounted cash flow ('DCF') method, involves 'discounting of the profits' (dividends, earnings, or cash flows) the stock will bring to the stockholder in the foreseeable future, and a final value on disposal.William F. Sharpe, Investments, Prentice-Hall, 1978, pp. 300 et.seq. The discounted rate normally includes a risk premium which is commonly based on the capital asset pricing model. https://store.theartofservice.com/the-discounted-cash-flow-toolkit.html

19. Stock valuation - Fundamental criteria (fair value) • Contested inputs included the terminal growth rate, the equity premium puzzle|equity risk premium, and beta.[http://blogs.law.harvard.edu/corpgov/2010/07/16/delaware-provides-guidance-regarding-discounted-cash-flow-analysis/ Delaware Provides Guidance Regarding Discounted Cash Flow Analysis] https://store.theartofservice.com/the-discounted-cash-flow-toolkit.html

20. Stock valuation - Limited high-growth period approximation • When a stock has a significantly higher growth rate than its peers, it is sometimes assumed that the earnings growth rate will be sustained for a short time (say, 5 years), and then the growth rate will Regression toward the mean|revert to the mean. This is probably the most rigorous approximation that is practical.[http://www.moneychimp.com/articles/valuation/dcf.htm Discounted Cash Flow Calculator for Stock Valuation] https://store.theartofservice.com/the-discounted-cash-flow-toolkit.html

21. Microeconomics - Opportunity cost • This kind of reasoning is a very important part of the calculation of discount rates in discounted cash flow investment valuation methodologies https://store.theartofservice.com/the-discounted-cash-flow-toolkit.html

22. Corporate finance - Investment and project valuation • Harvey each project's value will be 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 (applied to Corporate Finance by Joel Dean (economist)|Joel Dean in 1951) https://store.theartofservice.com/the-discounted-cash-flow-toolkit.html

23. Corporate finance - Investment and project valuation • The NPV is greatly affected by the discounted cash flow|discount rate https://store.theartofservice.com/the-discounted-cash-flow-toolkit.html

24. Grid parity - Pricing solar • If one makes the not-unrealistic assumption that the discounted cash flow|discount rate will be similar to the inflation rate of grid power, then one can calculate the levelized cost simply by dividing the original capital cost by the total amount of electricity produced over the system's lifetime. https://store.theartofservice.com/the-discounted-cash-flow-toolkit.html

25. Discounting - Other discounts • For 'discounts' in marketing, see discounts and allowances, sales promotion, and pricing. The article on Discounted Cash Flow provides a nice example about discounting and risks in real estate investments. https://store.theartofservice.com/the-discounted-cash-flow-toolkit.html

26. Financial model - Accounting • *Business valuation, especially discounted cash flow, but including other Valuation (finance)|valuation problems https://store.theartofservice.com/the-discounted-cash-flow-toolkit.html

27. The Theory of Investment Value • thesis, which was amongst the first to articulate the theory of Discounted Cash Flow (DCF) based valuation, and in particular, dividend based valuation. https://store.theartofservice.com/the-discounted-cash-flow-toolkit.html

28. The Theory of Investment Value - Theory • While Williams did not originate the idea of present value,http://www.in-the-money.com/artandpap/I%20Present%20Value.doc he substantiated the concept of Valuation using discounted cash flows|discounted cash flow valuation and is generally regarded as having developed the basis for the dividend discount model (DDM).http://www.cfainstitute.org/cfaprog/university/pdf/EquityPromo.pdf, http://www.finance-and-physics.org/Library/Articles3/scienceandfinance/science.htm Through his approach to modelling and forecasting cash flows—which he called “algebraic budgeting”—Williams was also a pioneer of the Pro forma#Business|pro forma modeling of financial statements.[http://roundtable.informs.org/public-access/min061a.htm] Here, Williams (Theory, ch https://store.theartofservice.com/the-discounted-cash-flow-toolkit.html

29. The Theory of Investment Value - Theory • Today, “evaluation by the rule of present worth”, applied in conjunction with an Capital asset pricing model#Asset-specific required return|asset appropriate discount rate mdash; usually derived using the capital asset pricing model of modern portfolio theory (Harry Markowitz and William Forsyth Sharpe|William Sharpe), or the arbitrage pricing theory (Stephen Ross (economist)|Stephen Ross) mdash; is probably the most widely used stock valuation method amongst institutional investors;http://www.investopedia.com/articles/03/011403.asp see List of finance topics#Discounted cash flow valuation|List of valuation topics https://store.theartofservice.com/the-discounted-cash-flow-toolkit.html

30. Working capital • Net working capital (NWC) is calculated as current assets minus current liabilities.[http://www.differencebetween.com/difference-between-gross-working-capital-and-vs-net-working-capital/ Gross Working Capital vs Net working Capital] It is a derivation of working capital, that is commonly used in valuation techniques such as DCFs (Discounted cash flows) https://store.theartofservice.com/the-discounted-cash-flow-toolkit.html

31. Business valuation - Income, asset and market approaches • Generally, the income approaches determine value by calculating the net present value of the benefit stream generated by the business (discounted cash flow); the asset-based approaches determine value by adding the sum of the parts of the business (net asset value); and the market approaches determine value by comparing the subject company to other companies in the same industry, of the same size, and/or within the same region https://store.theartofservice.com/the-discounted-cash-flow-toolkit.html

32. Business valuation - Income approaches • There are several different income approaches, including capitalization of earnings or cash flows, discounted future cash flows (discounted cash flow|DCF), and the excess earnings method (which is a hybrid of asset and income apprope of benefit stream to which it is applied) https://store.theartofservice.com/the-discounted-cash-flow-toolkit.html

33. Business valuation - Discount or capitalization rates • * In discounted cash flow|DCF valuations, the discount rate, often an estimate of the cost of capital for the business is used to calculate the net present value of a series of projected cash flows. https://store.theartofservice.com/the-discounted-cash-flow-toolkit.html

34. Business valuation - Option pricing approaches • Thus, for companies facing uncertainty of this type, the stock price may (should) be seen as the sum of the value of existing businesses (i.e., the discounted cash flow|discounted cash flow value) plus any real option value.Alfred Rappaport and Michael Mauboussin (Columbia Business School): [http://www.expectationsinvesting.com/tutorial11.shtml How Do You Assess The Value of A Company's Real Options?] Equity valuations here, may (should) thus proceed likewise https://store.theartofservice.com/the-discounted-cash-flow-toolkit.html

35. Working capital management - Investment and project valuation • Harvey each project's value will be 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 (applied to Corporate Finance by Joel Dean (economist)|Joel Dean in 1951) https://store.theartofservice.com/the-discounted-cash-flow-toolkit.html

36. Working capital management - Investment and project valuation • The NPV is greatly affected by the discounted cash flow|discount rate https://store.theartofservice.com/the-discounted-cash-flow-toolkit.html

37. Capital budgeting - Capital Budgeting Definition • Each potential project's value should be estimated using a discounted cash flow (DCF) valuation, to find its net present value (NPV) https://store.theartofservice.com/the-discounted-cash-flow-toolkit.html

38. Capital budgeting - Capital Budgeting Definition • Popular methods of capital budgeting include net present value (NPV), internal rate of return (IRR), discounted cash flow (DCF) and payback period. https://store.theartofservice.com/the-discounted-cash-flow-toolkit.html

39. Capital budgeting - Real options • The discounted cash flow methods essentially value projects as if they were risky bonds, with the promised cash flows known https://store.theartofservice.com/the-discounted-cash-flow-toolkit.html

40. Mixed-use development - Criticism • Another issue is that short-term discounted cash flow has become the standard way to measure the success of income-generating development, resulting in disposable suburban designs that make money in the short run but are not as successful in the medium to long term as walkable, mixed-use environments. https://store.theartofservice.com/the-discounted-cash-flow-toolkit.html

41. Real options valuation - Applicability of standard techniques • ROV is often contrasted with more standard techniques of capital budgeting, such as discounted cash flow (DCF) analysis / net present value (NPV) https://store.theartofservice.com/the-discounted-cash-flow-toolkit.html

42. Real estate appraisal - The income capitalization approach • Alternatively, multiple years of net operating income can be valued by a discounted cash flow analysis (DCF) model https://store.theartofservice.com/the-discounted-cash-flow-toolkit.html

43. Yield (finance) - Real Estate Property • Equivalent Yield lies somewhere in between the initial yield and reversionary yield, it encapsulates the Discounted cash flow|DCF of the property with rents rising (or falling) from the current annualised rent to the underlying estimated rental value (ERV) less costs that are incurred along the way. The discount rate used to calculate the net present value (NPV) of the Discounted cash flow|DCF to equal zero is the equivalent yield, or the Internal rate of return|IRR. https://store.theartofservice.com/the-discounted-cash-flow-toolkit.html

44. Yield (finance) - Real Estate Property • The calculation not only takes into account all costs, but other assumptions including rent reviews and void periods. A trial and error method can be used to identify the equivalent yield of a Discounted cash flow|DCF, or if using Excel, the goal seek function can be used. https://store.theartofservice.com/the-discounted-cash-flow-toolkit.html

45. Investment analysis - Business valuation • There are commonly three pillars to valuing business entities: comparable company analyses, discounted cash flow analysis, and precedent transaction analysis https://store.theartofservice.com/the-discounted-cash-flow-toolkit.html

46. Fundamental analysis - Procedures • The determined growth rates (of income and cash) and risk levels (to determine the discounted cash flow|discount rate) are used in various valuation models. The foremost is the discounted cash flow model, which calculates the present value of the future https://store.theartofservice.com/the-discounted-cash-flow-toolkit.html

47. Discounted cash flow • In finance, 'discounted cash flow' ('DCF') analysis is a method of valuing a project, company, or financial asset|asset using the concepts of the time value of money https://store.theartofservice.com/the-discounted-cash-flow-toolkit.html

48. Discounted cash flow • Discounted cash flow analysis is widely used in investment finance, real estate developer|real estate development, corporate financial management and patent valuation. https://store.theartofservice.com/the-discounted-cash-flow-toolkit.html

49. Discounted cash flow - History • Following the stock market crash of 1929, discounted cash flow analysis gained popularity as a valuation method for stocks https://store.theartofservice.com/the-discounted-cash-flow-toolkit.html

50. Valuation using multiples - Disadvantages • * Dependence on correctly valued peers: The use of multiples only reveals patterns in relative values, not absolute values such as those obtained from valuation using discounted cash flows|discounted cash flow valuations. If the peer group as a whole is incorrectly valued (such as may happen during a stock market bubble) then the resulting multiples will also be misvalued. https://store.theartofservice.com/the-discounted-cash-flow-toolkit.html