--%>

Cash flows in APV model

State the intuition of discounting several cash flows in APV model at particular discount rates?

E

Expert

Verified

APV model is a value-additive system where total value is computed through the sum of present values of the individual cash inflows and outflows.  Each cash flow will not essentially have same amount of risk linked with it.  To account for the risk differences in analysis, every cash flow is discounted at the rate commensurate with the inherent riskiness of cash flow.

   Related Questions in Financial Accounting

  • Q : Reason for negative synergistic gains

    State the reason for negative synergistic gains for British acquisitions of the U.S. firms?

  • Q : What is Creditors Equity What is

    What is Creditor's Equity. Also write down its formula.

  • Q : Define uniform costing Give a short

    Give a short introduction about the term uniform costing?

  • Q : Development phases of Friendship There

    There are six developmental phases of how friendships develop. Identify each phase in sequence and discuss the characteristics of each phase by using real or hypothetical example to illustrate this developmental path.

  • Q : Implement a user-defined matlab

    Your solution to the problem should be housed within a while loop, which allows the grader to test your solution repeatedly without having to re-execute the script, as shown in class. You should first display the purpose of the program, and then you should prompt the

  • Q : Help Otobai Motor Company is currently

    Otobai Motor Company is currently paying a dividend of $1.40 per year. The dividends are expected to grow at a rate of 18% for the next three years and then a constant rate of 5% thereafter forever. What is the value of its current stock price? Assuming that the discount rate is 10%.

  • Q : Performing the capital budgeting

    Explain difference between performing the capital budgeting analysis from the parent firm’s perspective as opposed to the project perspective.

  • Q : Characteristics of Dual currency bonds

    State the characteristics of the Dual currency bonds market instrument.

  • Q : Balance per bank What does Balance per

    What does Balance per bank signify?

  • Q : Cost accountant With Black

    Black Manufacturing Company Black Manufacturing produced a single product called the Great Beast. During the past three weeks, Lee High, the new cost accountant, had observed that production efficiency and input pr