Forecasting free cash flows Today, I want to apply the forecast drivers to the free cash flow formula to forecast free cash flows into the future for the tablet project. Today we are going to be talking about forecasting free cash flows. Today I want to apply those forecast drivers to actually forecast dollar cash flow. Dollar free… Read More »
Free Cash Flows Today I want to talk about free cash flows, a critical element in implementing any of those decision rules. Remember, there are two components to NPV. There are Free Cash Flows, and there is a discount rate, because NPV if you recall from last time, is little more than just a discounted stream of cash… Read More »
Components of free cash flow What I want to do in this lecture is talk about forecast drivers, or the assumptions required to forecast each component of the free cash flow formula out into the future. And we are going to do it by way of a specific example. So let’s get started. So imagine we are a company… Read More »
Return on investment – ROI Today I want to talk about return on investment and in particular, what I want to discuss is the strengths and weaknesses of the internal rate of return relative to the net present value rule. So let’s get started. Today we are turning to a new topic, return on investment. But before diving in… Read More »
Term structure of interest rates Last time we talked about interest rates. In particular, we talked about how interest rates are quoted versus how interest rates are used to discount cash flows. We also talked about how to deal with cash flow streams when the cash flows arrived more than once a year or less frequently than once a… Read More »
In this topic, interest rates, I want to start off by talking about interest rate quoting conventions and I want to talk about how to compute the present value and future value of a string of cash flow when they arrived at the irregular time, non-annual and when the compounding is not annual as well. Now, I want… Read More »
Impact of inflation on time value of money I want to talk about inflation and its impact on our real returns or our consumption. Let’s get started. Hey, everybody. Welcome back to Corporate Finance. So last time we introduced taxes, and we explored the impact of taxes on our cost of capital, our discount rate, and our dollar investment… Read More »
Why does money have a time unit and why do we need to account for it? The answer is that there is an opportunity cost associated with not having money today. Specifically, with money in hand, we can “put it to work” in a financial sense. That is, we can invest it in a savings… Read More »
Is EVA a good measure of value creation? We have one more thing to do here, and that thing is let’ s agree for just a minute that EVA is a good measure of value creation. You do not have to agree, but just agree, bear with me for one minute. Let us say EVA is a proper way of… Read More »
EVA Example But very simple example just to round up the idea of whether a company is creating or destroying value. Let us consider a company that is generating a NOPAT of $9 million. Therefore, from an accounting point of view, this company is making money. It is investing $100 million of capital. That capital was raised from capital providers,… Read More »