A Monte Carlo Comparison between the Free Cash Flow and Discounted Cash Flow Approaches

One of the debates in the capital budgeting model selection is between the free cash flow and DCF methods. In this paper an attempt is made to compare SVA against NPV model based on Monte Carlo simulations. Accordingly, NPV is found less sensitive to value driver variations and has got higher forecast errors as compared to SVA model.

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Year of publication:	2002
Authors:	Akalu, Mehari Mekonnen ; Turner, Rodney
Publisher:	Amsterdam and Rotterdam : Tinbergen Institute
Subject:	Cash Flow \| Betriebliche Budgetierung \| Projektbewertung \| Wertanalyse \| Monte-Carlo-Methode \| Theorie \| Capital budgeting \| Investment appraisal \| DCF methods \| Project Analysis \| Shareholder Value Analysis \| Value Management Techniques.

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Series:	Tinbergen Institute Discussion Paper ; 02-083/1
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	834821745 [GVK] hdl:10419/85999 [Handle] RePEc:dgr:uvatin:20020083 [RePEc]
Classification:	G30 - Corporate Finance and Governance. General ; G31 - Capital Budgeting; Investment Policy ; L6 - Industry Studies: Manufacturing ; L8 - Industry Studies: Services ; L9 - Industry Studies: Transportation and Utilities ; M10 - Business Administration. General ; O22 - Project Analysis ; O32 - Management of Technological Innovation and R&D
Source:	EconStor

Persistent link: https://www.econbiz.de/10010324971