Free cash flow models, terminal values and the timing of asset replacements
AbstractThis paper analyses the issue of the timing of expenditures in replacing fixed assets within the context of valuing firms using the free cash flow approach. Standard practice amongst both practitioners and academics is to assume a smooth pattern in these expenditures past some future point, and such a pattern is improbable. This paper develops a model that rests upon much less restrictive assumptions, shows that the model is readily amenable to implementation, and that the difference in valuation results could be quite substantial.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal New Zealand Economic Papers.
Volume (Year): 42 (2008)
Issue (Month): 1 ()
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Web page: http://www.tandfonline.com/RNZP20
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