Discounted Cash Flow Research Articles

Nickel Price Projection Using Multivariate Regression Method and Investment Feasibility Analysis of Nickel Mining in Indonesia with Sensitivity Analysis and Monte Carlo

Nickel is one of the metals commonly used in various industries. Indonesia is one of the countries that has the largest nickel reserves in the world. Nickel prices will be formed through an equilibrium mechanism between production supply and nickel demand. This study will analyse the relationship between nickel price formation, supply, and demand. Nickel prices will also affect the feasibility of nickel mining investment in Indonesia. The data used in this study consists of market data derived from historical reports of the last 5 – 12 years (2010 – 2022) and mining plan assumptions derived from benchmarks with similar industries. The methods used in this analysis are multivariate regression, discounted cash flow, sensitivity analysis, and Monte Carlo simulation. The results of the analysis that have been carried out show the relationship between nickel supply and demand with prices, with estimated nickel price projection ranging from $16,750 / Ton – to $18,927 / Ton. The factors that most influence the feasibility of mining investment are nickel price, sales realization, water content, contractor costs, and fuel costs. The risk of nickel mining investment in Indonesia based on Monte Carlo simulations is estimated at around 11.36%. This shows that nickel mining investment in Indonesia is still very attractive.

‘Lying with numbers’ in international arbitration against states

Abstract Recent international arbitration cases, especially P&ID v Nigeria, have highlighted how easy it is for claimants—whether in treaty-based Investor–State Dispute Settlement or commercial arbitration—to advance immense claims grounded on essentially no evidence against state respondents. This largely reflects the readiness of many quantum experts to engage in the practice which Martin Wachs called ‘lying with numbers’ in order to misrepresent the execution risks of speculative unbuilt projects in a manner that is radically at odds with empirical data regarding such execution risks, which is exacerbated by the ignorance of many arbitrators about business economics and discounted cash flow valuation. This situation is unlikely to improve, and overall standards of candour in valuation in international arbitration will keep going down as the system will keep rewarding the act of cloaking advocacy in the guise of scientific or technical rationality in order to ‘lie with numbers’.

Discount rates and cash flows: A local projection approach

We develop flexible local projections to quantify the relative contributions of expected discount rates and cash flows to the variation of dividend yields. Local projections enable the incorporation of large information sets, the use of monthly data along with annual data, and the consideration of time variation in the dividend yield decomposition. By expanding the set of state variables and allowing for time-varying parameters, our results show that the variation of expected discount rates remains the primary contributor to market volatility, whereas the contribution of expected cash flows is considerably smaller.

Algorithm of innovation project risk management

Aim. To develop a risk management algorithm that can be used in risk management of innovations.Objectives. On the basis of the current international standards of risk management and scientific publications to study the existing practice of risk management, highlighting the main elements of the risk management process into a single generalized risk management algorithm; based on the results of the first task, as well as taking into account the identified features of the process of innovation implementation, to develop an algorithm for risk management of innovation projects.Methods. The work is based on the study of scientific publications in the field of risk management and analysis of international standards on risk management in order to adapt them to the peculiarities of innovation management.Results. The problem of risk management of innovation projects is one of the most difficult in project management because of the significant degree of uncertainty inherent in innovation. The article reflects the problem of investors’ acceptance of increased risk during the realization of an innovation project. The peculiarity of risk management of innovations is the need to accept increased risk, and in return the opportunity to present a new product or technology to the market. Taking into account the considered peculiarities, an algorithmic approach to risk management of innovation projects is given. The practical significance of the study lies in the possibility of applying the developed algorithm of innovation project risk management by economic entities, which will improve the quality of corporate risk management and increase the efficiency of resource utilization. The authors point out the necessity of selecting a project with positive NPV (discounted cash flow, DCF) and accepting the increased risk of the innovation project in the process of innovation management.Conclusions. The authors have created a comprehensive methodological approach to innovation project risk management in the form of a sequence of actions algorithm. The purpose of its application is to increase the efficiency of risk management and to achieve a successful result of innovation implementation.

Valuation of the Fair Market Value of the Shares of PT Link Net Tbk in Connection with the Acquisition of Shares by PT XL Axiata Tbk in 2022 Using the Discounted Cash Flow (DCF) and Abnormal Income Method

Corporate takeover actions (acquisitions) carried out by companies are always in the spotlight of the capital market public, because corporate acquisition actions are classified as material transactions that require very large financing, and it is not uncommon for there to be conflicts of interest in their implementation. However, sometimes there can be cases where a company acquires another company in the hope of gaining synergies but instead incurs losses, which may be due to an unreasonable acquisition price that can harm many parties including the public and shareholders. This can of course be prevented by assessing the performance of the company to be acquired previously and assessing the company's fair market (valuation). This research was conducted to analyze the fair market value of 20% of the shares of PT Link Net Tbk in connection with the planned acquisition by PT XL Axiata Tbk using the Discounted Cash Flow and Abnormal Income methods and to analyze the price offered by PT XL Axiata Tbk to acquire 20% of the shares of PT Link Net Tbk is classified as fair or not. The research results show that in the valuation using the Discounted Cash Flow (DCF) method, based on the results of calculating the fair market value of 20% of PT Link Net Tbk amounting to IDR 2,795,896 million or IDR 4,882 per share, while in the valuation using the Abnormal Income method, it is based on the results of calculating the value fair market 20% PT Link Net Tbk amounting to IDR 2,602,704 million or IDR 4,545 per share. If we compare the transaction value of the purchase of PT Link Net Tbk shares by PT XL Axiata Tbk which is IDR 4,800 per share, the transaction value is considered fair in both methods, both the Discounted Cash Flow (DCF) and Abnormal Income methods.

РОЗРОБКА ТА РЕАЛІЗАЦІЯ ПРОЕКТУ МОДЕРНІЗАЦІЇ КОМПАНІЇ (НА ПРИКЛАДІ КОМПАНІЇ «КERNEL»)

Crucial logistical and export challenges, faced by agricultural producers in Ukraine, are described. Drawing on data from the Kernel company, one of the leading players in the agribusiness sector, internal strategies to overcome export barriers are analyzed. Crucial sources of financial resources mobilized by the company are identified. Additionally, an analysis of the company’s transportation assets is conducted. Furthermore, an investment project for the modernization of key assets, specifically railway transportation, is outlined. This involves collaboration with European countries, whereby Ukrainian grain delivery costs to European ports are offset. The economic feasibility of the project is substantiated through the discounted cash flow method.

Improving the methods to assess the investment attractiveness of fast-growing companies

Subject. The article addresses accounting and analytical support for assessing the investment attractiveness of fast-growing companies, having social and economic significance for countries of the world. Objectives. The aim is to improve the accuracy of investment valuation under discounted cash flow method by adding expert adjustments to financial models. Methods. The study employs logical and systems approaches, methods of comparative and investment analysis. A significant stage of the research was building a financial model based on the discounted cash flow method. The results of the study are presented in a tabular form. Results. I formulated my own definition of fast-growing companies, identified specific features of this group of companies that should be taken into account when assessing investment appeal. The paper reveals the main reasons for attractiveness of shares of fast-growing companies for potential investors and possible risks of investing in shares of such issuers, analyzes the dynamics of revenue as a significant component for building an estimation model under the discounted cash flow method, developed a predictive coefficient of revenue dynamics of fast-growing companies, which was used to assess the investment attractiveness of Detsky Mir company. Conclusions. The advantages of using the predictive coefficient of revenue dynamics in the context of assessing the investment attractiveness of fast-growing companies may be a more realistic revenue dynamics, and, therefore, a more conservative outcome of the investment assessment, consideration of the life cycle of fast-growing companies in general and the specifics of sectoral revenue dynamics. Disadvantages include the complexity of calculations to determine the coefficient and the need for statistical database for several subsequent periods.

Evaluating Financial Risks of Carbon Capture in the Oil & Gas Industry Using Advanced Machine Learning Techniques

This paper thoroughly examines the financial risks and opportunities related to implementing carbon capture and storage (CCS) in the oil and gas sector. We utilize sophisticated machine learning techniques to create a robust methodology for measuring CCS projects’ economic feasibility and risk level. Our approach encompasses various crucial factors, such as investment costs, operational expenditures, carbon pricing, and the oil and gas market dynamics. By utilizing discounted cash flow modeling, sensitivity analysis, and Monte Carlo simulation, we produce probabilistic financial results that offer valuable insights for decision-makers. The findings emphasize the crucial significance of policy backing, technological progress, and strategic portfolio management in influencing the financial outcomes of CCS investments. This study enhances the comprehension of Carbon Capture and Storage (CCS) as an essential instrument for reducing carbon emissions in the oil and gas industry while effectively managing the intricate financial aspects of transitioning to cleaner energy sources.

Considerations on the discounted cash flow method in the determination of assets

The aim of this theoretical essay is to discuss, in the light of accounting and finance theory, the Judgment - REsp 1.877.331 of the 3rd Panel of the Superior Court of Justice (STJ), which decided that to determine the assets of a retiring partner, unless determined in the Articles of Association, the Discounted Cash Flow (DCF) method is not pertinent. As a basis for the argumentation of this essay, the concepts of assets and their characteristic of generating future economic benefits were incorporated. For the essayist, this characteristic is a beacon for measuring assets and the value of a company, which is made up of a set of tangible and intangible assets. The Discounted Cash Flow is considered one of the main methods for valuing companies. It is essentially financial, derived from the capacity to generate future projected benefits, discounted to present value, adding the value of perpetuity. This method can measure the company in its current situation without the need for growth projections or future macroeconomic factors since case law considers that the future does not belong to the retiring partner. However, the ability to generate these economic benefits cannot be disregarded, which could lead to a valuation that is not fair value, thus harming one of the parties in the dispute. Based on these aspects discussed in the essay, using Discounted Cash Flows in Asset Determination processes is considered pertinent.

The Discount Rate for Investment Analysis Applying Expected Utility

In decision analysis, expected utility of discounted cash flows is the traditional approach to incorporate risk aversion into the evaluation of a project. The choice of discount rate as well as the convergence with the beta-adjusted approach from finance have always been in question. To address this gap, we adopt a risk-sharing setup in which investors have both treasuries and the stock market as alternatives to the project. For a full utility analysis of all the investor’s capital, we provide a unique discount rate that allows setting the horizon at the termination of the project. For a traditional analyst who conducts expected utility of discounted cash flows and ignores the capital not allocated to the project, we recommend an adjusted discount rate that compensates for double-counting the systematic risk.

DETERMINING CONCESSIONARY ITEMS FOR “AVAILABILITY PAYMENT ONLY” PPP PROJECTS: A HOLISTIC FRAMEWORK INTEGRATING VALUE-FOR-MONEY AND SOCIAL VALUES

Public-private partnerships (PPPs) have been widely applied in infrastructure development around the world. However, reasonable concessionary items are critical to compromise interest conflicts between government agencies and sponsors to ensure project success. A broad literature review centering on PPP transaction structuring revealed two significant research gaps: (1) a lack of attention to the ‘availability payment only’ (APO) funding method and (2) negligence of the public side’s perspective in determining concessionary items. The research objective was to develop a methodological framework for determining concessionary items in APO PPP projects while considering the interests of the public side. This study proposed a value-for-money (VFM) and social values integrated framework which accommodates discounted cash flow (DCF) analysis, bargaining game modeling, and multi-objectives decision-making (MODM). This framework enables a decision-making process based on both an indifferent feasible interval of concessionary items under a discount rate agreed upon by both parties and an optimal set of concessionary items. Additionally, results of a sensitivity analysis indicated that project construction profit can significantly affect feasible and optimal concession items, and the optimal concession period is less sensitive to changes in risk allocation. The application of proposed model indicated that this paper successfully provides a methodology for determining a feasible interval and an optimal concession items group tailored to APO PPP projects. This study paves the way towards a platform for the public and private partners to jointly and quickly come up with sound PPP concessional items in light of the win-win principle, particularly under the APO funding mechanism.

Estimating the Synergy Value of Merger Valuation between Bank Syariah Indonesia (BSI) and Sharia Business Unit of (SBU) Bank Tabungan Negara (BTN)

The merger and acquisition of banking industry are a very important issue in Indonesia. Similar to other banking mergers, the mergers will benefit Bank Syariah Indonesia (BSI), Sharia Business Unit of Bank Tabungan Negara (BTN), and all company stakeholders. This study assessing Bank Syariah Indonesia’s current business environment, determine company’s valuation. This study analyses the environmental aspects of Bank Syariah Indonesia (BSI), both external and internal. Research methodology using quantitative and case study design. This study collects secondary data through various sources. This study computes valuation using Free Cash Flow to Firm (FCFF) and the Discounted Cash Flow (DCF) method. The result show that the synergy value of merger valuation between Bank Syariah Indonesia (BSI) and Sharia Business Unit of Bank Tabungan Negara (BTN) is Rp.98,333,621.89. By calculating the synergy value of Bank Syariah Indonesia (BSI) and Sharia Business Unit of Bank Tabungan Negara (BTN) merger, management could get additional data from preparation of merger and acquisition process.

Stock Valuation of Telecommunication Provider in Saudi Arabia with the Case Study of Tawal Spin-Off of Saudi Telecom Company (STC)

This study investigates the stock valuation implications of the strategic spin-off plan involving Tawal, the biggest telecom tower infrastructure provider in Saudi Arabia, a 100% owned subsidiary of the Saudi Telecommunications Company (STC). Saudi Public Investment Fund (PIF) has sent a nonbinding offer to acquire 51% of Tawal's shares from the STC group, which is aligned with the Saudi Vision 2030 strategy. The findings of this research contribute nuanced insights into the relationship between spin-offs and stock valuation within the context of the telecommunications industry. By scrutinizing the anticipated impact of the Tawal spin-off on STC stock price, this study provides valuable information for investors and the STC group navigating the strategic decisions and their implications for the stock value. The research employs a comprehensive stock valuation framework with absolute-relative valuation, internal-external analysis, and risk assessment to gauge the potential effects on STC's respective stock values of the Tawal spin-off. Comparative analyses conducted within the telecommunications sector in Saudi Arabia offer valuable benchmarks for assessing the performance of STC Group. According to the intrinsic valuation approach and the Discounted Cash Flow model, STC stock price is undervalued compared to the stock price of 19th November 2023 by 38.3 SAR. Assuming the spin-off failed, obtaining the fair price at 41.5 SAR per share based on the DCF model and 54.2 SAR based on the relative valuation PE ratio. If the Spin-off is agreed upon and concluded, the fair price is valued at 42.6 SAR per share based on the DCF model. Sensitivity analysis and Monte Carlo simulation resulted in two results: the gross profit margin is a sensitive variable of the stock price movement, and the buy option is preferable. In line with that, STC has a solid holding organization, is financially healthy, and has sustained a competitive advantage. STC is expected to deploy the liquidity into investment and expansion in the region and globally, generating a higher return to satisfy the investor interest.

Comparative Analysis of Three Semiconductor Technology Companies

This paper presents a meticulous financial analysis of Nvidia, Intel, and Texas Instruments, three leading companies in the semiconductor industry. And these three companies also operate in different section in the semiconductor industry. The study aims to provide insights into effective investment strategies of these companies. The investigation encompasses an analysis of recent financial indicators for these companies like exploring the meaning of various data, along with an exploration of asset selection challenges faced by nine distinct investor profiles including Value, Income, PEG, Index, Ratio analysis, DCF, Momentum, Insider buying and Stock buyback investors. Leveraging established financial models, the research reveals that Index, Momentum, Insider Buying, and Stock Buyback investors are inclined to invest in all three stocks. Additionally, Ratio Analysis and Discounted Cash Flow (DCF) investors are inclined towards investing Texas Instruments. The insights gained from this analysis contribute to the development of tailored investment strategies, ultimately aiming to optimize financial gains within the semiconductor sector.

ARIMA Model, Discounted Cash Flow Analysis, and Dividend Discount Model for Five Technology Stocks' Pricing and Trading Strategy

This study examines the ability of three widely used financial and econometric models-the Autoregressive Integrated Moving Average (ARIMA), the Discounted Cash Flow (DCF), and the Dividend Discount Model (DDM), to accurately forecast the stock prices of five well-known technological companies. Every theoretical framework offers a unique point of view. DDM places an emphasis on the value of expected future dividends. Collecting historical information on each stock and then applying that information to the relevant models in order to make projections about future stock values was an integral part of the process. In order to evaluate the accuracy, dependability, and applicability of each model in regard to the technology equity, a head-to-head comparison was carried out. Based on the preliminary findings, it appears that while ARIMA can provide valuable insights for price changes in the short term, DCF and DDM can provide a more comprehensive view of the long-term intrinsic worth of a company's stock. However, the effectiveness of each model differed among the several technological stocks that were considered, underscoring the relevance of selecting a model that is adapted to the particular qualities and dynamics of a specific stock as well as the industry in which it operates.

Comparison of The Dividend Discount Model and The Discounted Cash Flow Model Valuation of Stock Kweichow Moutai

Stock valuation is an essential element of investment analysis, aiding investors in gauging a company's true worth. This essay conducts a literature review and a thorough demonstration of the calculation process, focusing on the Discounted Cash Flow (DCF) Model and the Dividend Discount Model (DDM), as key tools in stock valuation. The research examines the valuation of Kweichow Moutai Co., Ltd., a prominent Chinese company in the beverage industry. The results yielded significant disparities from the market price, with the DCF model indicating potential overvaluation by approximately -33.39%, while the DDM model pointed to an even greater overvaluation of about -77.94%. These findings underscore the complexity of stock valuation and the need for a comprehensive approach. Investors should not solely rely on market sentiment but should combine these models with extensive research and a diversified portfolio strategy.

Research on the Impact of Logistics and E-commerce on JD.com

ESG (Environment, Social, and Governance) considerations take significant weight in valuing a company for investors. They are essential to show each company’s growth and sustainability. As the generations change, more and more companies take ESG seriously and start advancing their products to gain more customers and build a sustainable brand image. In this report, ESG is primary factor in evaluating of JD.Com Inc. In the annual report of JD.Com Inc., it can be seen that there are three main segments of the operating income period, and two business segments account for the main part. Therefore, in this report, people will analyze the basic competitive situation of the two business sectors of the company and the judgment of competitive strategy respectively through Porter's Five Forces model. Analyze whether JD.Com Inc. is a company on the rise, the industry, and future prospects. This company belongs to an industry with highly predictable cash flow, so in this report, discounted cash flow valuation model (DCF model) will be used to analyze JD.Com Inc. Whether is at a reasonable valuation price.

Analysis of Investors’ Choices in Technology Companies

This paper examines how to analyze which technology companies are suitable for different types of investors through various financial indicators. First, this paper chooses four technology companies, namely Tesla, Tencent, Microsoft and Apple. Next, Yahoo searches for various profit and loss metrics for several companies and groups these metrics into three categories, including risk, profitability and market ratio. Finally, reasonable suggestions are given by analyzing the investment preferences of nine kinds of investors. The nine types of Investors are price/earnings to growth ratio investors (PEG investors), discounted cash flow Investors (DCF investors), income investors, value investors, index investors, momentum investors, insider investors, ratio analysis and stock buyer. According to the analysis results, PEG investors and DCF investors may choose Tesla, while DCF investors and income investors may choose Tencent. In addition to index investors, other investors are likely to choose Microsoft. Apple is likely to be picked by PEG investors, value investors and momentum investors. The research significance of this paper is to help investors who lack certain financial knowledge to choose their own types of stocks, and to describe the characteristics of different types of investors to help investors judge which investment method is suitable for them.

Urban Electric Bus Fleet Transition Research Based on Eco-Impact Valuation Model and Discounted Cash Flow Analysis

This paper investigates the transition to an all-electric bus fleet as a strategy for sustainable urban development, focusing on its financial and environmental impacts. Utilizing the Eco-impact Valuation Model, Discounted Cash Flow Analysis (DCF), and the E-bus Replacement Model, the study assesses the feasibility and benefits of replacing conventional diesel buses with electric buses. Firstly, the Eco-impact Valuation Model analyzes and translates the environmental costs of diesel and electric buses into monetary social costs, evaluating the potential cost reduction to society offered by electric buses. Secondly, the DCF is used to demonstrate the potential cost-saving superiority of electric buses over diesel buses within a single investment period, providing a financial perspective on the transition. Lastly, the E-bus Replacement Model plans the phased introduction of electric buses and updates bus routes over the next ten years, based on air quality severity in different city zones. The severity of pollution is ranked using the TOPSIS evaluation model, with influencing factors weighted by the Analytic Hierarchy Process (AHP). The models are applied to three cities, including Houston, Buenos Aires, and Shenzhen, offering insights into the ecological, financial, and practical feasibility of electric buses for policymakers.

Applied denitrifying bioreactor cost efficiencies based on empirical construction costs and nitrate removal

Adoption of edge-of-field conservation practices, such as denitrifying bioreactors, may be intrinsically linked to barriers associated with cost. However, most previous bioreactor cost efficiency assessments assumed values for either costs and/or nitrate removal. The objective of this work was to use actual construction costs as well as monitored nitrate removal to develop empirical cost efficiencies for eight full-size bioreactors in Illinois, USA. Capital construction costs were obtained via invoices or personal communications. A cash-flow discounting procedure was used to develop an equal annualized cost for each bioreactor assuming two media recharges over a 24-y planning horizon. These costs were combined with monitored nitrate removal based on one to six years of monitoring per site. Construction costs averaged $12,250 ± $7520 across the eight sites (or, $16,020 ± $9960 in 2023 price levels) but considering one of the sites was a paired bioreactor system, costs averaged $10,890 per bioreactor unit. Drainage treatment area-based cost averaged $132/ha-y and treatment area was strongly correlated with capital costs (R2 = 0.90; p = 0.001). The bioreactors averaged $108/m3 of woodchips and available federal government conservation programs could have offset an average of 70% of this cost. Monitored nitrate removal across 27 site-years resulted in a median of $33/kg N-y removed. This mass-based cost efficiency was higher than most previous assessments because the monitored nitrate removal for the study sites was lower than has been previously assumed or modeled. Future reporting about bioreactor recharge timing and cost will help guide assessment and planning. Water quality planning efforts should also consider the increasingly important engineering design costs, which were not included here. Suggested research and outreach to improve bioreactor cost efficiencies involves scaling the physical capacity of this technology for larger treatment areas, revisiting the use of low-cost non-standard fill media, and providing practical construction training.