Calculate present value of expected cash flow to shareholder
When valuing the shares of my company, I calculate the present value of the expected cash flows to shareholders moreover I add to the result obtained cash holdings and liquid investment. Is that correct?
Expert
The company is incorrect to add those, if it is not going to distribute the cash holdings in the near future. This is also incorrect to add the complete value of the cash holdings since the company requirements part of it to go on with its operations as the minimum cash holdings.
This could be correct to add all the cash holdings only in the following cases as follows:
a) When the interest rate received for the treasury to equal the interest rate paid for debt;
b) When the cash holdings were distributed instantly, and
c) When the cost of debt needed to compute the WACC was the weighted average of the cost of debt and the interest rate received for the treasury in this a case, the helpful debt in order to compute the ratio debt/shareholder’s equity has to be the debt minus the cash holdings.
The value of the excess cash holdings but over the essential amount in order to go on with the operations is lower than the book value when the interests received for the treasury are lower than interests paid for debt.
The case study of an economic analysis is done for Schlumberger, oilfield Service Company. They are No. 1 in terms of market caps, revenue and employees globally. When any references are used/outside sources (except for Schlumberger's annual reports and financia
Who introduced put–call parity?
Financial Management: It means organizing, planning, directing and controlling the financial activities like procurement and use of funds of enterprise. This means exerting general management principles to the financial resources of enterprise. <
Liquidity Ratios: Such ratios comprise the Current Ratio and the Quick Ratio or the acid test ratio. Liquidity ratios demonstrate the Liquid position of a company in the short term that is the capability of a firm to pay its obligations in short term.
If the model could not even find bond prices right, how could this hope to accurately value bond options?
Who proposed definition and development of low-discrepancy sequence theory or quasi random number theory?
What is optimal capital structure?
Explain breakthroughs on low-discrepancy sequences.
ABC Company plans to buy back 1 million shares of its own stock from its cash reserves at $50 a share. This will raise the bankruptcy costs by $10 million, and the debt/assets ratio from 35% to 40%. The income tax rate of the company is 30%. Determine the value of the
What are Long-Term Debt and what are their main parts.
18,76,764
1930382 Asked
3,689
Active Tutors
1438164
Questions Answered
Start Excelling in your courses, Ask an Expert and get answers for your homework and assignments!!