--%>

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 : Exposure is the regression coefficient

    Discuss the given statement: “Exposure is the regression coefficient”.

  • Q : Abatement The process of allocating the

    The process of allocating the arrears of estate assets to the distributions. Distributions from the estate proceed in a particular order starting with specific legacies, effusive legacies, general legacies, and finally residuary legacies. If legacies assets are not capable to meet the will's prov

  • Q : Retail Invoice versus Tax Invoice

    Explain the difference between Retail Invoice vs. Tax Invoice?

  • Q : Workings and nature of the financial

    Assume that you are really interested in investing in the shares of Nokia Corporation of Finland that is a world leader in the wireless communication. However, before making the investment decision, you might like to learn about company. Take a look of the website of

  • Q : Problem on National income Providing

    Providing reasons, describe the treatment assigned to the following which estimates national income.(i) Family members working freely on farm owned by family.(ii) The Payment of interest on borrowings through general government.

  • Q : Investment approach of Warren Buffet

    Investment approach of Warren Buffet: According to Benjamin Graham, the father of securities analysis, value investment was the only form of investment which means that purchasing a stock at less than its intrinsic

  • Q : Flexible and fixed budgets Give a brief

    Give a brief contrast between flexible and fixed budgets?

  • Q : Fundamenetal Issues on Management

    1.  Somerset Ltd manufactures components for the motor industry. In one of its workshops it has three workers, Joe, Jack and Jonny, who at any one time work on batches of the same component. The standard time allowed to produce one unit is one hour. The workers rate of pay is

  • Q : What is forfaiting transaction What is

    What is meant by the forfaiting transaction?

  • Q : Recommended action for GM to manage its

    General Motors exports the cars to Spain however the strong dollar against the peseta, hurts the sales of GM cars in the Spain. In Spanish market, GM faces the competition from the French and Italian car makers, like Renault and Fiat, whose currencies stays stable wit