Value Of Cash Flows Research Articles

Applying Three Financial Analysis Methods in Investment: A Comparative Case Study

The three primary financial analysis techniques for real estate investment that are introduced and used in this study are Net Present Value , Internal Rate of Return , and payback period. The purpose is to demonstrate how these metrics help evaluate the profitability and efficiency of investment properties. Two residential flats were analysed over ten years using a case study approach. Cash flow models were developed to simulate rental income, maintenance costs, and taxes. The payback period indicated how long it would take to recoup the initial investment, the IRR evaluated each investment's efficiency, and the NPV calculated the present value of future cash flows. The results showed that while Flat 1 had a higher total return due to its larger value and rental income, Flat 2 provided more efficient returns with a lower initial cost. Both properties broke even after ten years, with Flat 2 offering a slightly higher IRR and better efficiency. This research highlights the limitations of these methods, such as NPVs assumption of a constant discount rate and IRRs overestimation of reinvestment rates. It contributes to real estate analysis by offering a structured framework for evaluating investment efficiency and profitability.

Assessment of the using a mobile crushing and sorting plant investment attractiveness at the development of construction material quarries

Purpose. To establish the influence of the quarry depth at the construction materials deposit mining on the payback period of investments when using the haulage mining system (HMS), cyclic flow technology (CFT), and mobile crushing and sorting plant (MCSP) with a comparison of its efficiency. Methods. The research used discounted value of cash flow methods to determine the company’s net present value (NPV) and the investment payback period. When establishing a mining enterprise’s technical and economic performance indicators, the present value factor of future costs and profits was considered. Findings. According to the total discounted cash flow value indicator, the technological scheme using a mobile crushing and sorting plant is the most attractive in the quarry depth range of 50-150 m. According to this indicator, it was established that it is better in comparison with the schemes of the haulage mining system and cyclic flow technology, respectively, by 19 and 26% at a quarry depth of 50 m. When the quarry depth increases from 100 to 150 m, the efficiency of the MCSP scheme in terms of the indicator of total cash flow will be 5.2 and 5.8 times exceeding the indicators of the CFT and HMS schemes, respectively. Originality. The impact of the quarry depth mining on the indicators of the cash flow discounted value, the net income of the enterprise NPV, and the payback period of the investment was determined, which allowed to determine the most effective technological scheme at the given quarry productivity of 1.6 million m3/year. It was determined that using a scheme with a mobile crushing and sorting plant compared to other schemes in the cash flow total cost indicator is more effective by 17-28% at a quarry development depth of 50 m. At the same time, at a quarry depth of 150 m, the effectiveness of the technological scheme of MCSP by the enterprise total profit indicator increases significantly to 2.0 and 3.5 times superior to the CFT and HMS schemes, respectively. Practical implications. The conducted research is essential when choosing technological schemes for exploiting construction raw materials quarries when their development depth increases. This result is especially relevant for mining companies that produce crushed stone, where mobile crushing and sorting plants can significantly improve economic efficiency.

Evaluating Profitability of Red Mud Based Geopolymer Brick by Using The Cost Benefit Analysis Framework

Red mud is a byproduct of Bayer process in alumina refinery which become a major problem in the industry. The waste causes alumina refinery to spend significant amount of capital and operational expenditure to handle and was historically have caused environmental damage to its surrounding environment. To fill the research gap, this work is design to define the cost and benefit of producing geopolymer brick based of red mud by using the Cost Benefit Analysis framework. The cost is determined by the capital and operational expenditure of constructing a geopolymer brick factory and benefit was determine by the amount of cashflow the factory would generate. The work is done in PT CBJ, a new alumina refinery based at Mempawah, West Kalimantan, Indonesia which in the future will produces approximately 30 million tons of red mud. The research showed the proposed project will potentially generating a positive present value cashflow worth $126,159,703.58 from processing an annual 1.5 million ton of red mud and $901,318.85 from 6,892 ton of red mud annual processing. However, the BCR only shows 1.02 and 1.03 ratio from both scenarios. Additionally, the sensitivity analysis shows some variables are way too sensitive after price changes which conclude the project is risky to execute.

Development of discounted value in accounting

The article analyzes the evolution of the concept of discounted value in accounting, ranging from simple mathematical models to modern analytical tools and a variety of approaches to the study of discounted value, emphasizing the activity of the scientific community in this area and the importance of introducing discounting methods in accounting. The relevance of this topic is justified by the need to take into account the time value of money, which makes it possible to effectively assess the current value of future cash flows. Discounted value based on the principle of time value of money implies the use of a discount rate that reflects market conditions and specific risks. FSBU5/2019, FSBU6/2020, FSBU26/2020, which confirms the importance of this instrument in accounting. The effective use of discounting requires consideration of multiple factors such as inflation, risks and alternative investment opportunities, making the valuation more complex and multifaceted. The correct application of discounted value contributes to a more realistic view of assets and financial liabilities, improving the accounting and management decision-making process.

Navigating the financial frontier: a case of investment decision-making in the wake of Reliance Industries Limited’s demerger

Learning outcomes This case study aims to equip students with the skills to evaluate the rationale behind a demerger decision, derive the enterprise value and equity value of the conglomerate using the discounted cash flow valuation modelling and assess the company’s value based on qualitative parameters using economy industry company analysis and strengths, weaknesses, opportunities and threats analysis. Case overview/synopsis This case study delves into the demerger of the financial services arm of Reliance Industries Limited into a separate unit named Jio Financial Services Limited. The independence of this unit is anticipated to enhance shareholder value and unlock the conglomerate discount. In light of these factors, a fundamental analysis of the firm is conducted to determine whether it presents a viable investment opportunity. Complexity academic level This case study is suitable for -graduate and postgraduate courses in financial management. Supplementary materials Teaching notes are available for educators only. Subject code CSS 1: Accounting and finance.

Determinants of credit spreads and cash flow-related lending in commercial real estate

Determinants of credit spreads and cash flow-related lending in commercial real estate

Asymptotic behavior of bond yields and volatilities for the extended 3/2 model under the real-world measure

Abstract The extended $3/2$ short rate model is a mean reverting model of the short rate which, for suitably chosen parameters, permits a sensible term structure of bond yields and closed-form valuation formulae of zero-coupon bonds and options. This article supplies proofs of the formulae for the expected present values of future cash flows under the real-world probability measure, known as actuarial valuation. Finally, we give formulae for asymptotic levels of bond yields and formulae for bond option prices for the extended $3/2$ model, under particular conditions on its parameters.

Investment Feasibility Analysis Using Discounted Cash Flow Valuation Method (Case Study: Gold Mine in Pit A PT XYZ)

Investment in the mining sector carries a high risk, so a comprehensive financial evaluation is required to ensure project feasibility. This study assesses the financial feasibility of gold mining investment in Pit A, PT XYZ, for the period 2025 to 2036. The purpose of this study is to evaluate the feasibility of the project through the analysis of key financial indicators such as Net Present Value (NPV), Internal Rate of Return (IRR), and Payback Period (PBP) using the Discounted Cash Flow (DCF) method. The DCF method was chosen due to its ability to project future cash flows and incorporate them into a comprehensive assessment of the potential benefits and risks of the project. In addition, sensitivity analysis was conducted to see the effect of changes in important variables such as revenue, cost of goods sold (COGS), and capital expenditure (capex) on the financial results of the project. The results show that the project is financially viable, with a positive NPV of US$404.16 million, an IRR of 52.10%, and a PBP of 3.32 years, all of which indicate a strong return on investment. Further sensitivity analysis shows that the project remains robust under various scenarios of changes in key variables. This study contributes to the investment evaluation literature in the mining sector by offering a more integrated approach to addressing investment uncertainty and risk through the combined use of the DCF method and sensitivity analysis.

Формирование оценочных значений, связанных с обесценением внеоборотных активов

The purpose of the study is to analyze the theoretical and practical aspects of the formation of accounting estimates related to the impairment of non-current assets. The author considers the features of impairment test for fixed assets and intangible assets, considering the requirements of federal and international standards. Based on the systematization of discounted cash flow calculation practices, a formula for determining the value in use as one of the possible values of the recoverable amount and a formula for the present value of cash flows, considering improvements in the accounting regulation system, are proposed. The practical significance of the research is the development of specific methodological recommendations for the calculation of individual articles and components of the value in use.

Corporate Value Assessment based on the EVA Model and Relative Valuation

As a risk-averse commodity, gold has seen new development opportunities in retail due to factors (e.g., geopolitical risks and conflicts, economic uncertainties, and inflation). Consequently, more and more investors are focusing on the gold retail industry. Evaluating the value of gold retail enterprises using scientific and effective methods is of great significance to both managers and investors. Therefore, this paper uses Chow Tai Seng, a Chinese gold retail enterprise, as a case study. Based on the company's development characteristics, we employ the EVA absolute valuation method and relative valuation methods including P/E, P/B and P/S ratios for valuation. The study finds that although its EVA values show a general downward trend from 2019 to 2023, they remain positive, indicating that the company's overall development is still on track. The development of enterprise valuation theory has gone through the MM (Modigliani-Miller) theory, Free Cash Flow Valuation Model, and the Capital Asset Pricing Model, among others. These theoretical models have gradually improved, and the theoretical system is continuously evolving. By summarizing and reviewing valuation theories and methods, this paper employs the DDM for valuation and the P/E ratio method under relative valuation based on the company's development characteristics. Combining these two valuation methods with the company's actual financial data and relevant value theories, the company can attract investors and address undervaluation by increasing its exposure through modern multimedia channels and enhancing data transparency.

The Impact of Geopolitical Conflict and Fed Rate Hikes on Asset Pricing

In the current context of weak economic recovery, ongoing Russia-Ukraine conflict, and consecutive interest rate hikes by the Federal Reserve, global financial and commodity markets have experienced intensified turbulence. To investigate the impact of the Russia-Ukraine conflict and the Federal Reserve interest rate hikes on asset pricing, this study first analyzed the U.S. stock market, bond market, and commodity market based on data from the CEIC database. From the comprehensive stock and year-on-year data after each round of interest rate hikes, it is evident that both the Russia-Ukraine conflict and the Federal Reserve interest rate hikes have had a significant negative impact on investors' financial assets. Additionally, due to the continuous interest rate hikes by the Federal Reserve, funds from the stock market have gradually shifted to the bond market. Furthermore, after analyzing the impact of the Russia-Ukraine conflict and the Federal Reserve interest rate hikes on the U.S. stock market, bond market, and commodity market, the study further explored the influence of these factors on asset pricing using the discounted cash flow (DCF) valuation model. Finally, the study provided an outlook on future market trends.

Navigating Reversed Valuation Dilemmas: SME Enterprises Nationalized in 1950s Poland - A Case Study

The publication describes a problem that often arises in court cases regarding the valuation of SME forcibly nationalized in the 1950s. Valuation of compensation to previous SME owners is an ongoing court debate in Poland. The authors proposed an approach that took into account the economic conditions at that time and complied with the principle of paying compensation for the actual losses incurred, and not for the potential losses that could be incurred as a result. At the same time, the publication analysed other similar judgments in cases regarding compensation for nationalized enterprises. The practical and scientific value of the publication lies in the fact that it addresses an existing practical problem and its solution. Research Design & Methods: the paper presents a conceptual proposal of the SME valuation method in unique circumstances, complemented by a detailed case study illustrating the application of this valuation approach. Findings: When calculating the compensation for nationalization or other forms of expropriation courts use various methods of valuing net assets (fair market value, book value, recreation value) plus separately determine the value of intangibles, such as licenses, based on the discounted average profits from such assets for a reasonable period of time. If indexation was employed (for historical cost valuation), it used either average interest rates in the economy, the cost of capital of a company, or the cost of lost opportunities for a particular company. Using discounted cash flow valuation for the entire business was uncommon and even if it was included in the bilateral investment treaties (which were meant to protect investors from expropriation) it was considered by the tribunals as speculative and unreliable. Our approach proposes net asset value approach with the use of inflation or average salaries for indexation (to calculate current values of assets) and a combined approach of historical values if they were known at the moment of nationalization and modern estimates of values of remaining assets (that belonged to the company but their value was not provided in the original documentation). Implications & Recommendations: The analysis of historical compensation decisions and bilateral investment treaties suggests that the most popular approach to valuing a loss from expropriation is the fair market value approach and net assets approach with a separate valuation of significant intangible assets provided that they gave certainty of profits for the investor. Contribution & Value Added: The practical and scientific value of the publication lies in the fact that it presents an existing practical problem of court calculation of compensations to owners of forcibly nationalized SMEs in Poland and its solution together with methodological framework that can be used in the future

Comparing Company Valuation Before and After IPO Study Case PT Pertamina Geothermal Energy Tbk

Affordable energy resources of energy play a crucial role in economic and social development to support food production, availability of water supply and sustainable healty lifestyle. In order to avoid long-term scarcity resulting from the continuous use of non-renewable energy sources, we must explore all potential renewable energy source that align with concernes about climate change and other environmental issues. As a continuation of the Indonesian government’s efforts to generate clean and environmental friendly energy, PT Pertamina Geothermal Energy (PGE) was established in 2006. It has contributed 82% of the installed geothermal energy capacity in Indonesia. By leveraging Indonesia’s location within the Ring of Fire as one of the world’s geothermal energy hubs, PGE has been supplying electricity to more than 2 million households in Indonesia with a potential emission reduction of 9.7 million tons of CO2 per year. To achieve sustainable business growth, PGEO is optimizing production in its operational areas by expanding installed capacity. In the company consideration, IPO is an appropriate step to financing the expansion. The author compares the company’s value before and after the IPO to determine the short-term impact of the IPO, helping investors gauge their confidence in making investment decisions in PGEO. This study utilizes secondary data from prospectuses, financial statements, annual reports, sustainability reports, company-published documents, as well as data from IDX.co.id and IDN Financials.com. The data was collected and analyzed to understand evaluate financial performance, and assess the company’s value before and after the IPO. The calculation of the company’s intrinsic value is conducted using the Discounted Cash Flow Valuation method for the pre-IPO period against the company’s financial projections for the years 2019 to 2022 and for the post-IPO period against the company’s financial projections for the years 2024 to 2028, using discount rates of 8.25% and 8.65% for each. In resulting the intrinsic value pre-IPO is IDR 1.141,28 and the intrinsic value post-IPO is IDR 1.300,86. The stock price of PGEO at its IPO on February 23, 2023, was IDR 875, while the adjusted closing price on December 29, 2023, was IDR 1,170. This study founds that the market price of PGEO’s stock, both before and after the IPO, are overvalued.

On the Determinants of Discount Rates in Discounted Cash Flow Valuations: A Counterfactual Analysis

On the Determinants of Discount Rates in Discounted Cash Flow Valuations: A Counterfactual Analysis

AKUNTANSI MANAJEMEN LINGKUNGAN, INOVASI HIJAU, DAN DAMPAKNYA TERHADAP KINERJA MANAJERIAL

Purpose: The study aims to explain how the application of environmental management accounting and green innovation affects managerial performance in manufacturing companies listed in the BEI in 2021. Methodology/approach: Research methods using explanatory methods. Of the 198 manufacturing companies sampled using purposive sampling, 60 companies obtained samples. Findings: Research results show that environmental management accounting has no impact on managerial performance, and product innovation has an impact on management performance. Environmental management accounting has no impact because some companies charge relatively small environmental costs. But in a descriptive analysis test on the mean value, it yields a minus value, which means that the accounting company's operating cash flow value in 2020 is smaller than in 2021, thus yielding a minus. Practical implications: This is because, at the time of the COVID pandemic, the results were in line with the triple bottom line theory, which measures the performance of a company in a comprehensive way by focusing on profit-making, social concerns, and environmental conservation. Originality/value: In Stakeholder Theory, companies determine and determine environmental management strategies and accounting that are able to maintain the interests of stakeholders, which later stakeholders can contribute to the company to improve company performance and value in the future. Green Innovation can also improve managerial performance by applying new technologies (hardware or software) related to production processes that will lead to energy efficiency, pollution reduction, waste recycling, environmentally friendly design and environmental management within the company

Modelling the impact of business risk on the competitiveness of purpose-grown biomass of annual and perennial crops

Modelling the impact of business risk on the competitiveness of purpose-grown biomass of annual and perennial crops

Practice Briefing: The implications of a move towards explicit discounted cash flow (DCF) models for property investment valuations

PurposeThe primary purpose of this Practice Briefing is to examine the implications of the recommendations of the Royal Institution of Chartered Surveyors (RICS) Review of Investment Valuations to shift towards (explicit) discounted cash flow (DCF) valuations on valuers, clients, risk management and market data.Design/methodology/approachThis Practice Briefing will develop a conceptual framework to articulate the impact of the shift towards explicit modelling assumptions in valuations. A comparative analysis is conducted to contrast traditional valuation approaches with an explicit DCF approach.FindingsThe proposed shift to DCF valuations in the real estate industry carries both subtle and profound implications. While on the surface, the move appears to bring minimal change since current valuations are already DCF-based, a deeper exploration reveals a potential transformation to the understanding, analysis and measurement of pricing and risks in commercial real estate.Practical implicationsThe traditional techniques adopted in valuations have become pervasive in the industry, hindering more sophisticated modelling and analysis of individual assets and portfolios. Explicitly modelling assumptions in both the initial years of cash flow and perpetuity calculations would unveil fundamental relationships and rationales that have previously been buried within, and perhaps ignored by, an All Risks Yield (ARY).Originality/valueThis briefing identifies the cause of confusion when interpreting ARY differentials on implied target returns and risk and demonstrates how a change to explicit assumptions, such as growth and letting periods, would enhance transparency, enabling more informed client–valuer discussions, which in-turn will boost confidence in valuation accuracy, lead to more sophisticated asset modelling, market data, forecasting and market analysis.

Stock valuation before and after the COVID-19 pandemic: Free Cash Flow to Firm (FCFF) and relative valuation approach with Discounted Cash Flow (DCF) valuation method

Stock valuation before and after the COVID-19 pandemic: Free Cash Flow to Firm (FCFF) and relative valuation approach with Discounted Cash Flow (DCF) valuation method

The Effect Of Free Cash Flow And Good Corporate Governance On Firm Value

The purpose of the study was to determine the condition of Free Cash Flow, Audit Committee, Managerial Ownership, and Institutional Ownership simultaneously on Company Value in food and beverage sub-sector companies listed on the Indonesia Stock Exchange in 2022. The research method uses qualitative research. Collection techniques with documentation methods obtained from internet information. Data analysis using multicollinearity, Multiple Linear Regression, Heteroscedasticity, Autocorrelation Test. Based on the results of data analysis, it can be concluded that the highest Free Cash Flow value is owned by MLBI, and the lowest is owned by CLEO. The highest Audit Committee value is owned by BUDI, CAMP, CEKA, CLEO, DLTA, ICBP, INDF, MLBI, MYOR, ROTI, and STTP, and the lowest is owned by ULTJ. The value of Managerial Ownership is owned by CEKA, and the lowest is owned by TBLA. The highest Institutional Ownership value is owned by BUDI, CAMP, CEKA, CLEO, DLTA, ICBP, INDF, MLBI, MYOR, ROTI, and STTP, and the lowest is owned by ULTJ. The highest PBV value is owned by GOOD, and the lowest is owned by PT SKBM. Free Cash Flow, Audit Committee, Managerial Ownership, and Institutional Ownership simultaneously affect Firm Value. Keywords: Free Cash Flow, Good Corporate Governance, Audit Committee, Managerial Ownership, Institutional Ownership, firm value.

Deployment of Lifetime Cost Analysis to Reassess Economic Current Density in the Presence of Vietnam’s Market Economy

A decent choice of conductor size for overhead power transmission lines can provide economic advantages throughout the project’s lifetime. One of the crucial criteria for sizing conductors is economic current density. In Vietnam, the electricity industry has extensively utilized the 1950s-era economic current density that ignores the value of cash flow at diverse points in time and applies the assumption of the constant electricity tariff and wire cost. These costs, nonetheless, are likely to greatly impact the figures of economic current density; as a result, these figures must be modified. This paper puts forward novel figures of economic current density that are systematically determined on the basis of lifetime cost (LTC) analysis in the presence of Vietnam’s market economy. The LTC is made up of the initial capital expenditure (ICE) and the overall operating cost (OPC), which includes the expense incurred for maintenance and electricity energy loss. An analytical formulation of ICE related to conductor size and system voltage is established based on information from recently built overhead transmission lines and a regression-based method. The electricity energy loss is computed based on equivalent hours of maximum power loss contingent upon equivalent hours of maximum power usage throughout an analytical expression obtained on the basis of the regression technique from load consumption patterns in the past. Finally, the feasibility and efficacy of the proposed economic current density values are validated by practical case studies of overhead transmission lines in Vietnam. The deployment of the suggested strategy demonstrates a decrease in lifetime cost ranging from approximately 5% to around 20% in comparison to the methodology prescribed by the existing Vietnam standard.