O'Reilly logo

Corporate Value Creation: An Operations Framework for Nonfinancial Managers by Lawrence C. Karlson

Stay ahead with the world's most comprehensive technology and business learning platform.

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, tutorials, and more.

Start Free Trial

No credit card required

APPENDIX B

Business Valuation Models

image INTRODUCTION

In this appendix, models are developed that calculate the present value of various cash flow streams frequently encountered when valuing business plans. The theoretical framework for these models was developed in Appendix A. Where possible the models refer to the equation(s) in Appendix A that form the basis for the various business models that follow.

image STREAM OF DISTINCT CASH FLOWS1

image

FIGURE B-1 Stream of Distinct Cash Flows

Application

Equation [B-1] can be used to calculate the present value of any stream of cash flows that are based on estimates or growth assumptions for each period. In this sense [B-1] is completely general and in fact is the starting point for developing special cases such as the perpetual and finite models. Equation [B-2] is simply the expanded form of Equation [B-1].

Appendix A Reference:

Equations [A-1] and [A-2]

image

Where:

PV = Present value of a stream of cash flows
image Sum of the periodic cash flows in increments ...

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, interactive tutorials, and more.

Start Free Trial

No credit card required