Journal of Finance Vol. 50 No. 4 1995
The Valuation of Cash Flow Forecasts: An Empirical Analysis.
Abstract
This article compares the market value of highly leveraged transactions to the discounted value of their corresponding cash flow forecasts. For the authors' sample of 51 highly leveraged transactions completed between 1983 and 1989, the valuations of discounted cash flow forecasts are within 10 percent on average of the market values of the completed transactions. Their valuations perform at least as well as valuation methods using comparable companies and transactions. The authors also invert their analysis by estimating the risk premia implied by transaction values and forecast cash flows and relating those risk premia to firm and industry betas, firm size, and firm book-to-market ratios.
- Volume
- 50
- Issue
- 4
- Pages
- 1059-93
- Sources
- bibtex:phds-export.bib