IDEAS home Printed from https://ideas.repec.org/a/sbr/abstra/v54y2002i2p136-147.html
   My bibliography  Save this article

Simplified Discounting Rules, Variable Growth, And Leverage

Author

Listed:
  • Frank Richter

Abstract

It was shown earlier that unconditional expected cash flows can be discounted at a constant risk-adjusted discount rate if these cash flows follow a multiplicative binomial process with a constant growth rate (“simplified discounting rule”). This paper extends this analysis to the case of variable growth rates of expected cash flows. The earlier analysis was also based on the assumption of all-equity-financing. The impact of a financing strategy based on deterministic leverage ratios is included in this paper as well. It analyses the conditions to apply the weighted average cost of capital as a discount rate. The paper reflects the results of Modigliani/Miller (1963), Miles/Ezzell (1980), and Löffler (1998) visà-vis the background of this theory and discusses issues of practical application.

Suggested Citation

  • Frank Richter, 2002. "Simplified Discounting Rules, Variable Growth, And Leverage," Schmalenbach Business Review (sbr), LMU Munich School of Management, vol. 54(2), pages 136-147, April.
    • Handle: RePEc:sbr:abstra:v:54:y:2002:i:2:p:136-147
    as

    Download full text from publisher

    File URL: http://www.vhb.de/sbr/pdfarchive.html
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Marc Steffen Rapp, 2006. "Die arbitragefreie Adjustierung von Diskontierungssätzen bei einfacher Gewinnsteuer," Schmalenbach Journal of Business Research, Springer, vol. 58(6), pages 771-806, September.
    2. Frank Richter, 2011. "Barwert von Cashflows und Residualgewinnen bei unsicheren Inflationserwartungen," Schmalenbach Journal of Business Research, Springer, vol. 63(5), pages 430-457, August.

    More about this item

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sbr:abstra:v:54:y:2002:i:2:p:136-147. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: sbr (email available below). General contact details of provider: https://edirc.repec.org/data/fbmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.