Discounted Cash Flow Analysis - Empirical Study

12804 WordsJan 3, 201252 Pages
An empirical study of the discounted cash flow model Martin Edsinger1, Christian Stenberg2 June 2008 Master’s thesis in Accounting and Financial Management Stockholm School of Economics Abstract The purpose of this thesis is to compare the practical use of the DCF model with the theoretical recommendations. The empirical study is based on eight different DCF models performed by American, European and Nordic investment banks on the Swedish retail company Hennes & Mauritz (H&M). These models are currently being used internally by the corresponding equity research departments to determine the fair value of the H&M stock. The aspects that are studied are regarded as the basic theoretical requirements of the DCF model. The discrepancies…show more content…
Empirical findings .................................................................................................................................. 14 4.1 Historical information ..................................................................................................................... 14 4.2 Forecasting procedure ..................................................................................................................... 15 4.3 Discount rate .................................................................................................................................... 17 4.4 Steady state assumption .................................................................................................................. 18 4.5 Other valuation aspects................................................................................................................... 20 4.6 Implied target prices and stock performance .............................................................................. 21 5. Discussion of empirical results............................................................................................................. 22 5.1 Historical information ..................................................................................................................... 22 5.2 Forecasting procedure ..................................................................................................................... 23 5.3 Discount rate
Open Document