--%>

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 : Monetary/nonmonetary and temporal method

    Discuss dissimilarity in translation process between monetary/nonmonetary and temporal method.

  • Q : Segmented capital market Assume that

    Assume that your firm is operating in the segmented capital market. State some of the actions that you would recommend to diminish the negative effects?

  • Q : Representative office of any bank

    Explain what is meant by the Representative office of any bank.

  • Q : Explain the term Company Explain the

    Explain the term Company in reference to Accounting?

  • Q : Characteristics of straight fixed-rate

    State the characteristics of the straight fixed-rate bond market instrument.

  • 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 or client market and wholesale

    Distinguish between retail or client market and wholesale or interbank market for foreign exchange?

  • Q : What is Internal Communication Internal

    Internal Communication: Employee or Organizational Communication refers to the phenomenon of interaction among employees that exist in organizations. In other words, it could also be termed as Internal Communications.

    Q : Definition of Ledger What is the

    What is the Definition of Ledger in terms of Accountancy?

  • Q : Asset-allocation funds Mutual funds

    Mutual funds that hold both bonds and stocks. Some asset-allocation funds follow specified allocation percentages and others take advantage of current condition. Those that take advantage of current condition is higher risk, because the fund manager tries to adjust the allocations to take advanta