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.
Active vs. Passive fund managers: Passive fund managers adopt a long term buy and hold strategy. Usually, stocks are purchased so that the portfolio’s returns will track those of an
Is the Free Cash Flow (FCF) the sum of the debt cash flow and the equity cash flow?
Tudor Online Publishing Corporation has tax rate of 35%, debt-to-equity ratio of 25%, and has (leveraged) beta 1.25. The riskless rate is 3% and the market return is 12%. Windsor Publishing Company is an all equity company and is in the same business. What is the requ
Who wrote famous paper of on distribution of cotton price returns?
Is this possible to use different WACCs within order to discount each year’s flows? In which cases?
Various broad research methodologies are available with which to study the development of accounting theory. a. Discuss the deductive, inductive, normative, and empirical research methods.
Which method must we use to valuate young companies along with high growth but uncertain futures? Two illustrations were Boston Chicken and Telepizza while they began.
Problem 21-1 Valuation Harrison Corporation is interested in acquiring Van Buren Corporation. Assume t
Which determines the shape of the term structure of Interest rates?
Explain useful properties of low-discrepancy sequence theory or quasi random number theory.
18,76,764
1952131 Asked
3,689
Active Tutors
1424185
Questions Answered
Start Excelling in your courses, Ask an Expert and get answers for your homework and assignments!!