An investor or business executive might project an estimated future cash flow for a business based on recent growth rates, industry information, futurism, estimated inflation, etc. The most common future cash flow to use is free cash flow, which takes out capital expenditures.
Using a discount rate, which is a rate of growth weighted for all of the returns and inflation and so on which will affect the business between the present and the future date, the future value is discounted for all the intervening years, and the Present Value will be given.
The present value dollars are going to be less in quantity than the future value’s dollars, because, in what is known as the Time Value of Money, today’s dollars are worth more than tomorrow’s dollars, so it takes fewer of today’s dollars to equal tomorrow’s dollars.
The DCF originated from discounted dividend calculations, where investors sought to compute the present value of future dividends, but since not all stocks pay dividends, the DCF is used often to value the underlying shareholder’s equity. Discounting all the way back to the initial investment yields the Net Present Value.
Large Cap mutual funds primarily invest in companies with the highest market capitalizations
Blend mutual funds offer exposure to both growth stocks and value stocks. Blend mutual funds seek to capture the...
Mutual funds that do not charge a front-end or back-end sales load are known as no-load funds
Asset Turnover is a ratio of the value of a company’s sales or revenues relative to the value of its assets
FINRA stands for Financial Industry Regulatory Authority, and they regulate securities firms in the United States
A price-weighted index is created by adding up the individual price per share of the companies included in the index and
Commodity pools are like the REITs of the commodity world, and some of them can be categorized as hedge funds or MFAs
These and other considerations make up what is known as a company’s dividend policy. Companies may have a different...
A Dividends Received Deduction (DRD) is a tax deduction available to corporations when they are paid dividends from...
The Head-and-Shoulders Top pattern forms when a stock is testing new highs on an uptrend, but fails to retest its high