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The Valuation of Cash Flow Forecasts: An Empirical Analysis / Steven N. Kaplan, Richard S. Ruback.
- Format:
- Book
- Author/Creator:
- Kaplan, Steven N.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w4724.
- NBER working paper series no. w4724
- Language:
- English
- Subjects (All):
- Cash flow--Forecasting.
- Cash flow.
- Management buyouts.
- Physical Description:
- 1 online resource: illustrations (black and white);
- Other Title:
- The Valuation of Cash Flow Forecasts
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 1994.
- Cambridge, MA : National Bureau of Economic Research, 1994.
- Summary:
- This paper compares the market value of highly leveraged transactions (HLTs) to the discounted value of their corresponding cash flow forecasts. These forecasts are provided by management to investors and shareholders in 51 HLTs completed between 1983 and 1989. Our estimates of discounted cash flows are within 10%, on average, of the market values of the completed transactions. Our estimates perform at least as well as valuation methods using comparable companies and transactions. We also invert our analysis and estimate the risk premium implied by transaction values and forecast cash flows, and the relation of the implied risk premium to firm-level betas, industry-level betas, firm size, and firm book-to-market ratios.
- Notes:
- Print version record
- April 1994.
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