What are the difficulties and problems when it comes to using the free cash flow valuation model

Q: What are the two fundamental approaches to Probabilistic Cash Flow Analysis? What are its benefits?

A: The two fundamental approaches to the probabilistic cash flow analysis is shown as follows: Cash…

Q: Why are accruals called spontaneous sources of funds, what are their costs, and why don't firms use…

A: Under the business setting, the spontaneous funds source states to the financing that arises from…

Q: Discuss Positive side effects and negative side effects cash flows? Provide examples. Explain the…

A: Solution- What is Cash flow-         Cash flows are internet the net of money and cash-equivalents…

Q: what is the most likely fair value method to utilize the Discountd Cash Flow model?

A: Discounted Cash Flow: The discounted cash flow model,estimates the intrinsic value of a security…

Q: What is free cash flow (FCF)?

A: Free cash flow (FCF): It speaks to money a firm creates after accounting for cash outflows to back…

Q: Why are discounted cash flow methods of making capital budgeting decisions superior to othermethods?

A:

Q: One problem with free cash flow method is gives too much weight to countinung value. Do you agree

A: Answer :- YES

Q: what are usefulness and weakness of discounted cash flow method?

A: Discounted Cashflow Method is the Method in which we compare Initial Project cost with expected…

Q: How would a reduction in the cash conversion cycle increase profitability?

A: Cash conversion cycle (CCC): It is a metric that speaks to the time it takes for a business…

Q: Discounting an investment’s cash flows using the internal rate of return will result in which of the…

A: Introduction: The internal rate of return (IRR) is a research and consulting metric used to assess…

Q: Cash surplus and economic assumptions are components of a financial planning model. True or False

A: Future is uncertain and it contains various risk factors. Financial planning (FP) model is used to…

Q: Which of the following is not an approach to replacement analysis? Solve, a. Cash flow approach b.…

A: Replacement analysis is the study of organizing, reasoning and implementation of successful…

Q: the Capital Asset Pricing M

A: Explanation : In simple words, Capital asset pricing model for valuing the cost of capital contains…

Q: What is the Free Cash Flow to Equity (FCFE)model? How might it be applied? When is it…

A: FCFEIt is the measurement of availability of cash to the company’s shareholder of equity share after…

Q: Why is it true that a reinvestment rate is implicitly assumed whenever we find thepresent value of a…

A: Discounting is the method of assessing the real value of a potential transaction or collection of…

Q: Which of the following is NOT true?     In risk-neutral valuation the risk-free rate is used to…

A: In risk-neutral valuation, it is assumed that the expected return on all investments is risk-free…

Q: Why are discounted cash flow methods of making capital budgeting decisions superior to allother…

A: Discounted cash flow: it is a valuation method. This method helps in determining the Value of a…

Q: What are the advantages of the free cash flow valuation modelrelative to the market multiple method?

A: Free cash flow describes the net cash provided from operating activities after making required…

Q: Why is the free cash flow valuation model so widely used?

A: With the free cash flow of the firm, administrators will focus on potential businesses that increase…

Q: How would discounted cash flow be applied to fair vaue valuations?

A: Valuation of a company means to determine the intrinsic value of a company or the value which the…

Q: How can we estimate Risky Cash Flow?

A: Companies always predict the cash flows related with the project because it helps to company to…

Q: Why can closed-end funds sell at prices that differ from net asset value while open-end funds do…

A: An open-ended fund is the investment vehicle in which assets are pooled from diversified investors…

Q: What is irregular cash flow stream?

A: Cash Flow has a flow concept. There can either be cash inflow or cash outflow. Generally, for…

Q: What is a discounted cash flow approach to fair market value estimation, and what are some of the…

A:

Q: (c) Why is net present value considered to be a superior method of evaluating the cash flows from a…

A: The concepts of capital budgeting tools can be used here to answer the questions. There are…

Q: Discuss the limitations of the traditional discounted cash flow (DCF) analysis

A: Discounted cash flow determines the present value of the future cash flow of the company. It is…

Q: Net present value and the payback period are examples of discounted cash flow methods used in…

A: Various methods used in capital investment decisions are Pay back period, Accounting Rate of…

Q: To find NPV, it requires

A: NPV or net present value technique is used to determine the present value of all future cash flows.…

Q: What do we mean by the cash conversion cycle? Explain how it works

A: Cash Conversion Cycle is used to measure the time it takes an organization to convert it's resources…

Q: Why do NPV method and the IRR method sometimes give different rankings of mutually exclusive…

A: Net present value (NPV) is the value of all the cash flow of the investment (positive and negative)…

Q: What are three concerns the financial manager should be aware of when analyzing a balance sheet, &…

A: There are financial statements prepared by the company for the purpose of considering information…

Q: What capital budgeting rule is a simple but imperfect attempt to solve the capital rationing…

A: Answer: Option c.  Payback rule   Explanation: Payback rule is a very simple method which is used to…

Q: why discounted cash flow methods are preferred to the more traditional techniques of payback and…

A: Before knowing the reason of preference for the use of any method, let us see the basic description…

Q: Calculate the present value and future value of an uneven cash flow stream.

A: A stream of cash flow is uneven  when all the amounts in the series of cash flows are unequal .i.e.,…

Q: What is free cash flow valuation model?

A: Free cash flow (FCF) is the amount of money available to an organization at their complete disposal,…

Q: disadvantages of using the relative techniques in valuation compared to discounted cash flow…

A:

Q: What should a firm’s goal be regarding the cash conversion cycle?  Explain

A: The cash conversion cycle measures the number of days between the company making a deposit to buy…

Q: Discuss the two variables that must be considered whether you are using the present value of cash…

A: The discounted cash flow approach and the relative valuation approach are both used to value any…

Q: Why is it more reasonable to assume, as the NPV rule does, that the intermediate cash flows are…

A: Before investing in new assets or projects, profitability is evaluated by using various methods like…

Q: What is the CAPM beta? How is it different from Cash Flow beta? Provide intuitive explanation and…

A: Beta is an important component of the CAPM- capital asset pricing model, which calculates the cost…

Q: Explain the following terms: incremental cash flow, sunk cost,opportunity cost, externality,…

A: Essentially, incremental cash flow refers to cash flow that a corporation acquires once it takes on…

Q: Which of the following is NOT a valuation model that is based on discounting cash flows? Select one:…

A: Financial Management: Financial management comprises of two words i.e. Finance and management.…

Loanable Funds Theory

The loanable funds theory is a neoclassical theory that determines the interest rate where the demand for loanable investments and supply of loanable funds intersect. To determine the interest rate, this theory employs linear regression and a demand curve. At the equilibrium point, demand for borrowings and demand for the issuance of borrowing funds are inextricably linked. This point of equilibrium should equalize demand and the supply of money available for borrowing.