Business, Management and Accounting
4 years ago

New valuation framework eliminates need to estimate future cash flows.

RePEc: Research Papers in Economics
Cash Flow Multipliers and Optimal Investment Decisions
Holger Kraft, Eduardo S. Schwartz

Paper Summary

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The article explores how a firm's investment decisions affect its cash flow multiplier. By analyzing data from over 13,000 firms, the researchers found strong support for their theoretical model. They developed a simple asset pricing model that uses current economic and firm-specific data to estimate firm value without needing to predict future cash flows or adjust for risk. This new approach could change how firms are valued in the future.