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Discount Rate—Explanation, Definition and Examples

Valutico

Different types of discount rates such as risk-free rate, cost of equity, or cost of debt, are used contextually in financial analysis. The Discounted Cash Flow (DCF) method uses the discount rate to consider all future cash flows of a business when calculating its current value.

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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 propose a theory of corporate finance based on the idea that firm managers maximize EPS: the difference between net operating profits and interest expense divided by total shares outstanding.