Abstract
Traditional cash flow estimation techniques focus on generating net cash flow estimates period-by-period, which are then discounted by the firm’s cost of capital. While conceptually strong, this aggregation approach can be insensitive to the fine-grained detail so important to managing project cash flows, in particular, that investment returns are always a combination of growth (renewal) and decline (convergence) forces at work over the firm's life. As is demonstrated in this paper, the aggregation problem can be addressed by employing a cash flow recovery period (CFRP) framework, which distinguishes and quantifies the renewal and convergence forces unique to each firm's project cash flows. The benefit of this more fine-grained approach is that it provides an additional level of detail that can be used to manage firm returns.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
More From: International Journal of Strategic Decision Sciences
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.