Risk is the probability that some or all of these future cash flows will not materialize.
When we purchase a stock, we are buying a stream of future cash flows.
The net present value of any economic project is the sum of its discounted future cash flows.
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In the long-term, however, market valuations should reflect the fundamentals of discounting a stream of future cash flows.
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Any such charge would have no affect on either the Company's current cash balance or future cash flows.
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Begin, I told him, with a simple model in which future cash flows are discounted to a present value.
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All financial instruments are a form of a promise of future cash flows.
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The theoretical value of a company is the present value of all future cash flows that will accrue to shareholders.
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Vahan and his team do the hard work of discounting future cash flows of all stocks that meet their screening criteria.
Hybrids between the two, like preferred stocks and convertible bonds offer future cash flows which are partly fixed and partly variable.
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It states that the value of any investment is the present value of all future cash flows discounted by a risk factor.
When central banks artificially lower interest rates, it causes future cash flows to be discounted less and, therefore, appear to be worth more.
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"For gilt investors, future cash flows on existing index-linked gilts will continue to be calculated by reference to RPI, " said the Economic Secretary, Sajid Javid.
The root issue I have with gold is that its price is based not on the present value of future cash flows but supply and demand.
It presumes that the market price is the best estimate of a stock's intrinsic value, or what all its current and future cash flows are worth.
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On the other, it reduces the risk premium applied to future cash flows, which, in turn, lowers the price targets calculated by commonly used valuation models.
If company insiders are able to misuse shareholders' funds at will, would-be investors will reduce their expectations of future cash flows and thus attach lower valuations to stocks.
The financial markets would value Laffer Shares in the same way that they value all other equity shares, which is based upon the present value of expected future cash flows.
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Having a valuable brand can increase expectations of future cash flows but only if the brand is utilized in innovative new ways or deployed on new products or in new markets.
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An ACO would want to securitize the EOC because it can exchange future cash flows for money now, possibly using that money to modernize systems and management techniques in order to increase profits from other EOCs.
High debt levels typically make a business unattractive for an acquisition as potential buyers have difficulty raising additional debt against the business, and the associated volatility related to the future cash flows also raises the cost of capital for acquisition.
At the heart of Buffett's simple but highly effective strategy is having the discipline to recognize when the market is not properly reflecting the true long-term value of a particular business, which can be calculated by discounting its likely future cash flows at an appropriate discount rate.
After all, the price of ads is based on auctions, and Facebook can command more because of the data it collects on users. f this is squelched, as it almost certainly will be in some overseas markets, the impact on future cash flows (and thus market valuation) could be significant.
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This is the same criterion used by the actuary of Social Security to compute the ultimate measure of the long-term financial condition of Social Security and used by private lenders in determining whether the purpose to which a prospective loan is put will increase the present value of a company's future cash flows by more than the amount of the loan.
The value of a company should be based on the value of its future free cash flows discounted at its cost of capital.
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Here is a better way to value stocks: First, the investor should weigh the cost of capital against the firm's stream of current and future free cash flows to determine the asset's value.
As a result the most important variables to the price of an asset are the level and future shape of free cash flows, and the discount rate used, which, as you rightly point out, can be analysed in terms of risk premium.
If I can understand how the company makes money and the future revenues are easy to model, then I have a sense of the cash flows that would support the dividend payout.
These statements are likely to address matters such as the company's future financial condition and performance (including earnings per share, profitability, liquidity, cash flows, debt levels, market share growth and other sales information, inventory levels and capital expenditures), its cost reduction initiatives and plans for store closings, and the expansion of product categories, including eBook content and eReaders.
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