Estimating cash flows in valuation process, Financial Management

Assignment Help:

The first step in valuation process is to estimate the cash flows that are expected to be received in the future. In debt securities, there are two types of possible cash flow: Interest and principal repayment. The estimation of cash flow is not easy excluding few securities such as government-dated securities. Government dated securities have known interest payments, so estimating cash flow becomes very easy for these kinds of securities. However, there are securities coming with different types of options; estimating cash flow for these securities is a little difficult. Examples of these kinds of securities are as follows:

  • Securities with an option to issuer or investor, to change the contractual due date of repayment of principal. For example, Callable bonds, Putable bonds, Asset-backed securities and Mortgage-backed securities.

  • Securities in which coupon payment is fixed periodically based on a formula that depend on some reference rates, prices or exchange rates. For example, Floating-Rate Securities etc.

  • Securities that give choice to the investor to convert the securities into shares. For example, convertible bonds, exchangeable bonds etc.


Related Discussions:- Estimating cash flows in valuation process

Strong form level of efficiency, Strong form level of Efficiency This l...

Strong form level of Efficiency This level states that price reflects all the available public and private information (past, present and future information). If the hypothesis

Determine the factors of large organisations, Determine the factors of Larg...

Determine the factors of Large organisations -  Greater efficiency and productivity achieves economies of scale -  Easier to manage, organise and control workers through hie

Increased common stock cash dividend signal to stock holder, Do you believe...

Do you believe an increased common stock cash dividend can send a signal to the common stockholders?  If so, what signal might it send? An enhance in cash dividends is often se

Risk, You are still a consultant for the Excellent Consulting Group. You ha...

You are still a consultant for the Excellent Consulting Group. You have completed the first assignment, developing and testing a forecasting method based on linear regression (Case

Structure and participation of hedge funds, Structure and Participation of ...

Structure and Participation of Hedge Funds: The typical structure for a Hedge Fund is to facilitate the tax concerns of investors and fund managers. Basically, there are two or

Apv capital budgeting is use for foreign capital expenditure, What creates ...

What creates the APV capital budgeting framework useful for analyzing foreign capital expenditures? The APV framework is a value - additivity method. Since international projects

Financial decision, Should a company pursue price hike or focus on increasi...

Should a company pursue price hike or focus on increasing sales volume

Example to show the companys current gearing, Q. Example to show the compan...

Q. Example to show the companys current gearing? The company's current gearing 2000/ 8500 × 100 = 23.53% The current gearing position is on the low side particularly wh

Deriving 6-month forward rates, Using details from table 8, let us co...

Using details from table 8, let us compute the 6-month forward rate. Simple arbitrage principle, like the one used to compute the spot rates are used in this proc

Application of concept of tvm, Q. Application of concept of TVM Sometim...

Q. Application of concept of TVM Sometime the financial manager has to deal with the varying situation of the decision making where the concept of TVM needs to be applied in th

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd