Principles of Cash Flow Valuation
An Integrated Market-Based Approach
- Joseph Tham, Visiting Assistant Professor, Duke Center for International Development(DCID), Sanford Institute of Public Policy, Duke University
- Ignacio Velez-Pareja, Politécnico Grancolombiano, Bogotá, Colombia
The valuation of assets, both tangible and intangible, is an important element of corporate finance. Putting a price tag on ideas is almost impossible, and in the new economy, where companies grow dependent on intangible assets all the time, market volatility can be attributed in large part to our collective ignorance of their value. There are two basic approaches to valuation: from financial statements to cash flows, and from cash flows to financial statements. The former projects historical financial statements into the future and the latter attempts to construct cash flow statements and use them in forecasting future financial statements. Established companies use the first method and start-ups the second. In Principles of Cash Flow Valuation, the authors strive to "close the gap" between these two approaches by presenting the principles of cash flow valuation and cost of capital in a clear and systematic fashion.
Finance professionals; MBA and other graduate students in finance