A Monte Carlo Comparison between the Free Cash Flow and Discounted Cash Flow Approaches
2002-08-09
Research Paper
This publication is part of collection
| Related Files |
|---|
View PDF Version
(2002-0831.pdf, 0.1MB) |
One of the debates in the capital budgeting model selection is between the free cash flow and DCF methods. In this paper an attempt is made to compare SVA against NPV model based on Monte Carlo simulations. Accordingly, NPV is found less sensitive to value driver variations and has got higher forecast errors as compared to SVA model.
Keywords
- capital budgeting
- DCF methods
- investment appraisal
- shareholder value analysis
- value management techniques
- project analysis
Classifications using
Journal of Economic Literature (JEL) Classification System
- L9 : Industry Studies: Transportation and Utilities
- L8 : Industry Studies: Services
- L6 : Industry Studies: Manufacturing
- G30 : Corporate Finance and Governance: General
- G31 : Capital Budgeting; Investment Policy
- M10 : Business Administration: General
- O32 : Management of Technological Innovation and R&D
- O22 : Project Analysis
Automatically Extracted Terms
- model
- value
- simulation
- cash flow
- project
- capital
- base case scenario
- analysis
- sva model
- value drivers
- shareholder value
- shareholder
- scenario
- investment
- company
- driver
- system
- table
- shareholder value analysis
- paper
