| Explanation for discount rate in present value formula? |
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go2self
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probably a matter of simplicity.
IMO you are right in the matter that one of the more signifcant (and somewhat predictable) factors in future valuation strategies is the inflation rate. (yes at times i do run out of excel spread sheet cells).
my calculations uses full spreadsheet format, starting with projections using linear formulas but allows me to make adjustments on indivdual dates, series of dates or periods on daily, weekly, monthly or annual trends.
Good luck on your project, that should take up some of your time allocated for sleep.
Time is our most volatile resource that if not used immediately is lost instantly
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Sat Aug 19, 2006 12:13 am |
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oldman8
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I think i heard before about this. There's something to do with valuation of securities. Assuming that the capital market is efficient, the intrinsic value of an asset should equal the market value. If we are just talking about cash flows, may be it the required rate of return should be using inflation rate. But since the value of the asset is depending on market value, the required rate of return should be using that of the market. Investors should weigh and compare for themselves. That's why if inflation is so high and the market is doing shit, we are better off keeping the money in the bank? Or am i wrong? Pls correct. Thanks a million. 
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Sun Aug 20, 2006 7:37 am |
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go2self
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quote:
Originally posted by oldman8
....Assuming that the capital market is efficient, the intrinsic value of an asset should equal the market value....But since the value of the asset is depending on market value, the required rate of return should be using that of the market...
IMHO the market exists to the contrary, relying more on extrinsic or perceived or projected value.
quote:
Originally posted by oldman8
..Investors should weigh and compare for themselves...
At the very least to the best of their ability.
quote:
Originally posted by oldman8
That's why if inflation is so high and the market is doing shit, we are better off keeping the money in the bank? ....
No wrong or right only what works for you. Maybe different strategies are needed, straddle, long & short, hedge position?
"you cannot win unless you play the game" - not sure who said it.
still think that projected values that do not consider inflation is more for ease rather than accuracy.
Time is our most volatile resource that if not used immediately is lost instantly
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Sun Aug 20, 2006 11:18 pm |
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go2self
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Why use the stock market's return?
IMO - applied simplicity usually is the correct definition
1) conformity everyone elses does it that way, especially industry professionals in presentations to general public
2) ease of design, projected stock values are derived from industry reports.. "still think that projected values that do not consider inflation is more for ease rather than accuracy."
and my best guesstimate...
3) keeps your mind (and money) on or in the market instead of moving investment to a market that is less, or not at all affected by inflation.
Could be there is no single hard answer but a lot of soft ones? Anyone?
Time is our most volatile resource that if not used immediately is lost instantly
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Mon Aug 21, 2006 12:03 am |
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go2self
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You are the beneficiary of #3. Kept you in the game.
As for #2, disparity from lack of, or very accurate information, my ignorance makes it impossible to draw a conclusion here. puts me back at #3.
And finally, #1's effect, "especially industry professionals in presentations to general public". If I were a professional I would save certain disclosures for 'select clients'. again back to #3.
Time is our most volatile resource that if not used immediately is lost instantly
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Mon Aug 21, 2006 1:58 am |
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oldman8
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Please help explain how this company get its discount rate to be at 16%.
Plan A
Initial cost for site A: $240k
Proceeds of site A: $60k
Value of site A in 10years: $250k
Annual cost: $5k
Plan B
Initial cost for site B: $370k
Proceeds of site B: $50k
Value of site B in 10years: $250k
Annual cost: $4k
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Mon Aug 21, 2006 4:13 am |
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oldman8
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quote:
Originally posted by coaster
Are you talking about "Internal Rate of Return?" How does that figure into calculating fair value?
beats me, i'm presented with the question from someone else. hehe
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Mon Aug 21, 2006 1:01 pm |
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