Two Fundamental Principles for Cash Flow Valuation (CFV)

14 Pages Posted: 30 May 2019

See all articles by Joseph Tham

Joseph Tham

Educational Independent Consultant

Ignacio Velez-Pareja

Grupo Consultor CAV Capital Advisory & Valuation

Date Written: May 7, 2019

Abstract

In this note, we discuss two fundamental principles for Cash Flow Valuation (CFV). We hope that adherence to these two principles will improve the practice of CFV. These principles are general, relatively uncontroversial, and should be acceptable as starting points for cash flow valuation. Principle One is on the conservation of cash flows. Principle Two is on the conservation of the (present) values that correspond to the cash flows in Principle One. We illustrate the application of these two principles with a simple numerical example.

Keywords: Financial modeling, Valuation, Weighted Average Cost of Capital (WACC), Free Cash Flow (FCF)

JEL Classification: D61, H43, M21, M40, M46, G12, G31, G33

Suggested Citation

Tham, Joseph and Velez-Pareja, Ignacio, Two Fundamental Principles for Cash Flow Valuation (CFV) (May 7, 2019). Available at SSRN: https://ssrn.com/abstract=3384058 or http://dx.doi.org/10.2139/ssrn.3384058

Joseph Tham (Contact Author)

Educational Independent Consultant ( email )

Ignacio Velez-Pareja

Grupo Consultor CAV Capital Advisory & Valuation ( email )

Ave Miramar # 18-93 Apt 6A
Cartagena
Colombia
+573112333074 (Phone)

HOME PAGE: http://cashflow88.com/decisiones/decisiones.html

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
94
Abstract Views
511
rank
346,852
PlumX Metrics