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FIN - A generalized model for the value of any asset is the present value

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Question;A generalized model for the value of any asset is the present value of the expected cash flows:Value=CFt/(1+k)tWhere:N= life of the assetCFt= cash flow in Period tk=appropriate discount rateBoth stock and bond valuation models use a discounted cash flow approach, which includes the estimation of three factors (N, CFt, k). Explain why each of these three factors is generally more difficult to estimate for common stocks than for traditional corporate bonds.

 

Paper#48562 | Written in 18-Jul-2015

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