It's hard to think of discounted cash flows when a company is still in the red (or voraciously consuming capital).
Our report on PFG, available here, has detailed appendices for you to see how we perform all calculations, including NOPAT, NOPAT margin, invested capital, economic earnings and discounted cash flows.
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Michael Blum, an MLP analyst at Wells Fargo Securities LLC, figures MLPs are trading at a multiple of 11.8 compared with 12 over the past five years using discounted cash flows, the standard metric for valuing MLPs.
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The net present value of any economic project is the sum of its discounted future cash flows.
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This concept, which appears on the surface to be quite benign, is typically used to compare the costs of acquiring a customer (often referred to as SAC, which stands for Subscriber Acquisition Costs) with the discounted positive cash flows that will come from that customer over time.
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The value of an operating asset are the net present value of expected free cash flows discounted to infinity.
It states that the value of any investment is the present value of all future cash flows discounted by a risk factor.
The value of a company should be based on the value of its future free cash flows discounted at its cost of capital.
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Begin, I told him, with a simple model in which future cash flows are discounted to a present value.
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The analyst is concerned with the growth rate of cash flow (the numerator) and the interest rate by which those cash flows are discounted (the denominator).
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When central banks artificially lower interest rates, it causes future cash flows to be discounted less and, therefore, appear to be worth more.
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