Cash flows in APV model
State the intuition of discounting several cash flows in APV model at particular discount rates?
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APV model is a value-additive system where total value is computed through the sum of present values of the individual cash inflows and outflows. Each cash flow will not essentially have same amount of risk linked with it. To account for the risk differences in analysis, every cash flow is discounted at the rate commensurate with the inherent riskiness of cash flow.
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To transfer amounts from retained earnings to contributed capital through stock dividends. The effect is to decrease retained earning and increase the stock account. Stock dividends also permanently retain the earnings in the corporation by moving it out of the retain
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