Value Of Cash Flows Research Articles

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.

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.

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

The study examines risk-specific determinants of credit spreads and underwriting practices for non-recourse commercial real estate loans using property and loan characteristics. We use the case of banks that maintain their loans on balance sheets and concentrate on non-recourse financing of large cash flow-generating properties in Europe and North America. The unique dataset includes the bank’s credit loan ratings, used in a 2-stage least square estimation as an instrument for the LTV ratio to address endogeneity bias. Additionally, we use the debt yield premium as a second instrument to validate our results. Our findings demonstrate that default risk and credit spreads depend on potential changes in cash flow and property value, which may deteriorate future underwriting ratios, as well as on measures taken to mitigate this risk. The results indicate that banks effectively adjust the loan’s minimum debt yield ratio to potential negative changes.

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

Perennial energy crops compete with conventional annual crops in land-use. The production price of biomass from perennial energy crops is thus derived on the basis of the opportunity cost principle. This means that in deciding whether to grow perennial energy crops, the farmer will demand a price for biomass that will at least provide him with the same economic effect over the lifetime of the plantation in the form of the present value of net cash flows over the lifetime of the energy crop plantation. The level of discounts used to discount the cash flows associated with (annual) conventional crops and perennial energy crops plays an important role in modelling the biomass production price. The business risk associated with the two types of crops is different, with generally higher risk associated with perennial energy crops. This study focuses on developing a methodology to incorporate the risk associated with growing conventional and energy crops and to derive the discount rate for both crop groups. The methodology is demonstrated using the example of the Czech Republic and the price level in 2021. The analysis using Czech data led to a discount rate of 8.5 % for conventional crops and 11.5 % for perennial energy crops. The increase in the discount value for perennial energy crops leads to an increase in the expected biomass sales price by a producer. The sensitivity of the biomass production price level to an increase in the discount rate is lower for Miscanthus plantations compared to short rotation coppice.

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.

Electricity Cogeneration Potential in Minas Gerais Cement Industry with Thermodynamic Cycles

To assess the electricity cogeneration potential in the Minas Gerais cement industry with thermodynamic cycles is the main purpose of this study. The potential was estimated based on Minas Gerais cement sector data. The Kalina cycle, the organic Rankine cycle, and the conventional Rankine cycle were technically and economically assessed. The technical evaluation considered the thermodynamic modeling with optimization including the mass, energy, entropy, and exergy balances and the heat transfer calculations for heat exchangers. The economic evaluation considered the economic modeling including the calculation of electric power generated specific cost, the total investment, cash flow, and payback. The result shows that the greatest irreversibilities are concentrated in the turbines and evaporators. The Kalina cycle confirmed more generated power and exergetic efficiency, but in terms of thermal efficiency, the values were very similar between the cycles. The three cycles can cover more than 35% of the energy demand, which means a considerable reduction in cement manufacturing costs. All cycles reveal a payback value lower than 3 years, a considerable value of cash flow, and high competitiveness in the current tariff scenario. The electricity cogeneration potential in the Minas Gerais cement industry is near 100 MW, and it is in the south-central region of Minas Gerais, where there is a greater population and energy demand concentration. This potential could save emissions of around 282,913 tCO2/year.

Moderating role of board gender diversity and firm size on the relationship between free cash flow and corporate sustainability of Thai listed companies

This study seeks to explore the information value of free cash flow (FCF) on corporate sustainability and investigate the moderating effects of board gender diversity and firm size on the association between FCF and corporate sustainability of Thai listed companies. The dataset consists of companies listed on the Stock Exchange of Thailand (SET) in 2022. Multivariate regression analysis is executed in this study. Subsequently, PROCESS macro served to evaluate the proposed hypotheses. This study found that FCF has a significant positive relationship with corporate sustainability. As well, board gender diversity and firm size both moderate the relationship between FCF and corporate sustainability, such that the positive effect of FCF on corporate sustainability is stronger when the proportion of female boards diminishes, while firm size is smaller. However, when firms have a larger proportion of females on the boards of directors for all levels of firm size, free cash flow indicates that there is no statistically significant effect on corporate sustainability. This study contributes to FCF and sustainability literature by understanding the extent of corporate sustainability.