Kapitalflussrechnungen: Aufbau und Aussagewert von Kapitalflussrechnungen (German Edition)

However, most companies and financial managers use another simplified way to find it. But at least it can serve as a starting point to figure out the real growth rate.

There are some alternatives to DVM that do not use dividends as a major formula input, mainly because of the need of having a valuation model for firms that do not pay any dividends at all. All of these methods have in common that the value of the firm is a function of the amount and timing of future cash flows and the level of risk that must be taken on to generate a return, sometimes in a present-value context, sometimes not. There is also a more sophisticated and complex method of firm valuation called the Free Cash Flow FCF Approach, which will be discussed later in this paper.

Before the discussion will be held on creating and using the pro formas, this paper will focus on the key input figure of the valuation process, the WACC. The WACC is the cost of both equity and debt capital and thus represents the total financing cost a company must face to finance its operations. It includes and compensates all risk factors, from business over market to financial default risk by also taking the level of leverage the level with which a company is debt financed into account.

The components of the WACC are the cost of equity, the cost of debt, the weight of equity relative to the total amount of the financing capital, the weight of debt and the effective tax rate. First of all, it will be focused on the single most important component of the WACC which is as well the most difficult to estimate correctly, the cost of equity or also called the required rate of return on equity. The Cost of Equity Capital, or also called the Cost of Common Stock rs is the rate of return that the company must earn to satisfy their stockholders that is equivalent to the rate of return that stockholders can expect to earn on equivalent- risk investments.

To calculate the cost of equity, typically three methods are used: These methods are not mutually exclusive and they are all subject to error when used in practice. In this paper, the focus will be on the CAPM approach, although the other two approaches will be briefly discussed.

To estimate the cost of common stock using CAPM, all of the components must be estimated appropriately.

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Business economics - Investment and Finance. BWL - Investition und Finanzierung. GRIN Publishing, located in Munich, Germany, has specialized since its foundation in in the publication of academic ebooks and books. The publishing website GRIN. Free Publication of your term paper, essay, interpretation, bachelor's thesis, master's thesis, dissertation or textbook - upload now! Register or log in. Our newsletter keeps you up to date with all new papers in your subjects. Request a new password via email. Table of Content 1.

References Appendix A 1.

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Major considerations and its calculation using CAPM The Cost of Equity Capital, or also called the Cost of Common Stock rs is the rate of return that the company must earn to satisfy their stockholders that is equivalent to the rate of return that stockholders can expect to earn on equivalent- risk investments. Valuating a German business - Case adidas. Probleme von Kennzahlen in der Unternehmensbewertung.

Corporate Governance und Dividendenpolitik. Unternehmensbewertung nach den Discounted Cash Flow-Verfahren. Der Cash Flow im betrieblichen Rechnungswesen. Kennzahlen und Kennzahlensysteme in der Betriebswirtschaft unter ge Cash Flow und Kapitalflussrechnung in der Bilanzanalyse. Cash-flow-basierte Finanzierungsstrukturen in der Filmindustrie - E Upload your own papers! Earn money and win an iPhone X. Both management and exterior investors may have vital interests in knowing the true value of a firm.

Management has a primary objective of maximizing shareholder value at least as featured by Anglo-American markets. It might be important for capital investors to know the real value of their investments, i. If it is lower, then arbitrage may be possible and a risk less profit may be earned from that transaction. The financial asset could be sold or not be bought and thus creating an instant profit for the investor. If it is higher the appropriate opposite of buying or holding might be recommended. In both cases calculating the intrinsic stock price and the real value of the firm is an important part to support investment or managerial decisions.

The first method is commonly and widely used in practice.

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This approach is often used by managers especially for stock evaluations. The average market multiple indicates the general state of the market.

In case of zero growth it is assumed that the company pays a fixed stream of dividends. In other words, future dividends are expected to stay constant.

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Under such condition, the value of a zero-growth stock is the capitalized value of its future annual dividends. The calculated firm value can thus be seen as a financial perpetuity. In the contrary, the constant growth case assumes a growing stream of dividends. This version of the DVM assumes that dividends grow over time at a specific rate. In fact, they are expected to grow forever to infinity at a constant rate of growth g. One endogenous problem of the constant growth model is that is does not allow for changes in expected growth rates.

To overcome this problem, another form of DVM might be used, which allows for growth rates varying over time. The DVM relies on three pieces of information: The most difficult and challenging part to find is the appropriate growth rate. It is also the most significant due to the sensitivity of the DVM to the rate of growth been used. However, most companies and financial managers use another simplified way to find it.

But at least it can serve as a starting point to figure out the real growth rate. There are some alternatives to DVM that do not use dividends as a major formula input, mainly because of the need of having a valuation model for firms that do not pay any dividends at all. All of these methods have in common that the value of the firm is a function of the amount and timing of future cash flows and the level of risk that must be taken on to generate a return, sometimes in a present-value context, sometimes not. There is also a more sophisticated and complex method of firm valuation called the Free Cash Flow FCF Approach, which will be discussed later in this paper.

Before the discussion will be held on creating and using the pro formas, this paper will focus on the key input figure of the valuation process, the WACC.

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The WACC is the cost of both equity and debt capital and thus represents the total financing cost a company must face to finance its operations. It includes and compensates all risk factors, from business over market to financial default risk by also taking the level of leverage the level with which a company is debt financed into account. The components of the WACC are the cost of equity, the cost of debt, the weight of equity relative to the total amount of the financing capital, the weight of debt and the effective tax rate.

First of all, it will be focused on the single most important component of the WACC which is as well the most difficult to estimate correctly, the cost of equity or also called the required rate of return on equity. The Cost of Equity Capital, or also called the Cost of Common Stock rs is the rate of return that the company must earn to satisfy their stockholders that is equivalent to the rate of return that stockholders can expect to earn on equivalent- risk investments.

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To calculate the cost of equity, typically three methods are used: These methods are not mutually exclusive and they are all subject to error when used in practice. In this paper, the focus will be on the CAPM approach, although the other two approaches will be briefly discussed.