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.
Financial Analysis: It is the investigation and interpretation of financial statements and associated financial reports. Trained and certified accountants generally complete this kind of analysis. The role of a financial analyst is to
Real gross domestic product: If GDP of a particular year is estimated or evaluated on the basis of the base year prices it is termed as real gross domestic product.
Sometimes, companies accuse investors of performing credit sales which they make their quotations fall. Is it true?
RainFlower Trading Limited is a wholesaler of electronic calculators in Hong Kong. It has been importing goods from a Philippine manufacturer for eight years. The Philippine manufacturer had accepted payments in advance in the past. Recently, because of political turm
Which parameter good measures value creation; the Economic Value Added (EVA), the CVA (Cash Value Added) or the economic profit?
Who explained market-neutral delta hedging?
The ROE is the ratio among net income and Shareholders’ equity. The meaning of Return on Equity is return to shareholders. Therefore, is ROE a correct measurement of the return to shareholders?
what are the objectives of international finance
What is Net Operating Profit after Tax (NOPAT)?
Explain deducing yield curve model of HJM.
18,76,764
1950379 Asked
3,689
Active Tutors
1433311
Questions Answered
Start Excelling in your courses, Ask an Expert and get answers for your homework and assignments!!