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Modeling Managers as EPS Maximizers

Reynolds Holding

In business schools, managers are taught to maximize the net present value (NPV) of future cash flows. We can broadly classify firms’ corporate behaviors into two categories: growth and value firms. In the real world, managers consistently ignore this advice.

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Discount Rate—Explanation, Definition and Examples

Valutico

This helps investors compare options and pick the ones that give the best value today based on what they expect to get back in the future. Key takeaways: The discount rate is primarily used by central banks to manage the economy and investors to calculate the present value of future cash flows from an investment.

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Post Holdings to Acquire Rachael Ray® Nutrish®, Nature's Recipe® and Other Select Pet Food Brands from The J.M. Smucker Co.

Benzinga

Additionally, Post expects the transaction to result in a tax benefit to Post with a net present value of approximately $120 million. Additional Information Barclays Capital Inc. A slide presentation will also be available at the same location on Post's website.

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M&A Valuation Methods: Your Essential Guide with 7 Key Methods

Valutico

Analysts use financial metrics and multiples such as Price to Earnings (P/E), Enterprise Value to EBITDA (EV/EBITDA), and Price to Book (P/B) ratios and apply them to the target company’s financials. These cash flows represent the net amount of cash that is expected to be received over the investment period.

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The Role of Financial Projections in Business Valuation

Equilest

They provide insights into the financial position, capital structure, and overall worth of the business. Balance sheet projections aid in assessing the company's ability to meet its obligations and measure its net worth. These projections are discounted back to their present value using an appropriate discount rate.

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Discounted-Cash-Flow-Analysis: Your Complete Guide with Examples

Valutico

It’s also used for calculating a company’s share price, the value of investments, projects, and for budgeting. The DCF method takes the value of the company to be equal to all future cash flows of that business, discounted to a present value by using an appropriate discount rate. Explaining The Terminal Value.

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Moonshots

Reynolds Holding

Managers who anticipate these agency problems won’t invest in a moonshot even if they believe it has a positive net present value. But managers can’t properly motivate the employees by rewarding them with the company’s stock, because its price wouldn’t track the value of the moonshot alone.