tag:blogger.com,1999:blog-31593599423817526962024-03-07T20:59:18.909-08:00camayyluvhiimlotsAnonymoushttp://www.blogger.com/profile/17993016399516251100noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-3159359942381752696.post-69880447621609865052015-10-13T02:15:00.000-07:002015-10-13T02:15:00.433-07:00Discounted Cash Flow by Matthew Roddan<div dir="ltr" style="text-align: left;" trbidi="on">
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When a company’s financials are
scrutinized, metrics used to evaluate the same are important. According to Wall
Street, a company’s cash flow is the best indicator for a company’s
performance. As such, DCF or discounted cash flow analysis is used to determine
a company’s worth by estimating future cash flows. </div>
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Projected cash flows (operating
profit + depreciation + amortization of goodwill - capital expenses - cash
taxes - alteration in working capital) are discounted to current value using
company’s weighted average costs. In short, DCF is an effective and
unparalleled tool for determining share value, which is important for
investors. </div>
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Also, a few financial scandals only
hiked the importance of DCF. With more concerns about reliability of earnings
and calculation of P/E or cash flow determination, coming up with a DCF model
calls for more efforts than merely dividing share price by income or sales.
However, taking this effort ensures investors get a good idea of the key
factors like share value, projection of future income or profits, growth ratio,
etc. Besides, DCF can’t be manipulated through aggressive accounting practices
easily. </div>
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While DCF is a very useful tool, it
isn’t without shortcomings. It is a mechanical valuation tool that works akin
to garbage in, garbage out saying. So, any minor change or change in
assumptions could lead to major differences. But, investors should always
crosscheck evaluations and allow considerable margin for such changes or
errors, when taking decisions. Major investment decisions should not be taken
purely relying on DCF calculations alone. What if a client backs off from a
contract, or what if interest rates hike unexpectedly or even a competitor
cropping up with crushing prices and the firm losing most business? Remember,
when expectations change, calculations or derivations based on the assumptions
will change along with it! Do you know even reputed investor Warren Buffet and
other financial experts and portfolio managers rely on DCF? </div>
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Discounting cash flow is tricky and
it is important to remember that assuming or predicting future estimates could
be meaningful or meaningless depending on the estimates taken and how
reasonable they are. Besides, numbers aren’t static and keep changing with
changing trends. As for investors, evaluating stock pricing is very important
and DCF is a handy aid for calculating the same, says <a href="http://www.matthewroddan.com/">Matthew Roddan</a> of <a href="http://www.projectninetynine.com/">Project Ninety Nine</a>. Do you know
stock market speculations are based on DCF? Whether it is acquiring a business,
or a property, or investing on stock, DCF helps with speculating approximately.
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<a href="http://www.matthewroddan.com/">Matthew Roddan</a></div>
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Anonymoushttp://www.blogger.com/profile/17993016399516251100noreply@blogger.com0tag:blogger.com,1999:blog-3159359942381752696.post-78994414010714898002015-10-11T23:25:00.000-07:002015-10-11T23:25:23.606-07:00Is Money Important? By Matthew Roddan<div dir="ltr" style="text-align: left;" trbidi="on">
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We’ve all heard the saying “Money can’t buy happiness”
several times. Funny how most of our problems are related to money or created
by money! Can we really ignore money? Money is a means of exchange and a very
essential commodity. Without money there’s nothing one can do today – home,
education, food, medical assistance and what not, everything boils down to
money. </div>
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Right from the time a life is brought into the earth,
everything revolves around money. While money is not everything, is does play a
key role in our lives and one can never do without it. That aside, what about
businesses? Can businesses be commenced or run without money? There’s always a
pursuit for money and there’s no denying the fact that enough money can bring
one a secured feeling. That’s one reason why many prefer starting their own
business, says <a href="http://www.matthewroddan.com/">Matthew Roddan</a> of <a href="http://www.projectninetynine.com/">Project Ninety Nine</a>. </div>
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With tumbling economy, many lost their jobs and were left in
lurch and succumbed to not being able to manage the change or uncertainty. Even
established individuals who had a career for years couldn’t take the hit and
look for new opportunities, if at all there were any! By having a business, one
can control their destiny and not leave it at the mercy of others – this is one
reason that pushes many to start their own business. </div>
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It is one reason why many who don’t have the resources for
starting a business, look for potential investors or crowd funding to start
their dream and take reigns of their future. When potential entrepreneurs have
profitable proposals, investors or sponsors are interested in taking the
plunge, provided they’re briefed on the possibilities adequately. <a href="http://www.matthewroddan.com/">Matthew Roddan</a>of <a href="http://www.projectninetynine.com/">Project Ninety Nine</a> says that’s
one reason why project proposals should be prepared along with financials and
statistics to show potential investors. Being prepared is the key to getting
funding and Project Ninety Nine brings potential entrepreneurs and investors to
discuss on options and take up profitable and potential ventures. </div>
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Unlike other sites, this is a real platform where investors
discuss and share knowledge and projects that catch their attention are given a
thought, analyzed and the site intervenes to come up with a mutually beneficial
proposal. In other words, the site stays though the ride and ensures both
parties’ interests are taken care of. Handling finances the right way ensures
one gets to live comfortably, secure one’s future and what not. Money is a
means to an end – one’s security, which influences one’s happiness, freedom and
quality of life. </div>
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<a href="http://www.matthewroddan.com/">Matthew Roddan</a></div>
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Anonymoushttp://www.blogger.com/profile/17993016399516251100noreply@blogger.com0tag:blogger.com,1999:blog-3159359942381752696.post-72680443759772434712015-10-05T03:10:00.000-07:002015-10-05T03:10:43.327-07:00Discounted Cash Flow ~ An Overview<div dir="ltr" style="text-align: left;" trbidi="on">
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DCF short for discounted cash flow analysis is a way to
evaluate a company, project or assets. Cash flows for the future are assumed
and discounted considering cost of capital to get the current values. Sum of
future cash flows outgoing or incoming is net present value (NPV) that’s taken
as price or value of cash flows. Discounted cash flow analysis is used to
determine the worth of an investment in simplified terms. It is used in real
estate development, investment finance, patent evaluation and corporate
financial management. </div>
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As <a href="http://www.matthewroddan.com/">Matthew Roddan</a>
from <a href="http://projectninetynine.com/">Project Ninety Nine</a> says,
understanding the probability of risk and profits is very important in an
investment decision. Investment decisions are made for profits and
understanding what one can expect is very important to determine the
suitability of an investment. Exponential discounting is the most common method
deployed for discounting, to evaluate future cash flows answering the question
– what would be the returns for an investment at a specific rate of return, as
against cash flow expected in the future? Hyperbolic discounting is another
method, though not deployed widely. Discount rate is the right weighted average
cost of capital (WACC) and it reflects cash flow risks. </div>
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Discounted cash flow analysis is important for any investor
to determine if or not an investment decision is suitable. Let’s look at it
this way – consider the investment as a business or a company. DCF is a way to
determine a company worth currently, based on calculations for the future.
Though this is a useful method, it does have hiccups. Being a mechanical
evaluation tool, it is bond by a principle and even simple changes in one value
could result in major changes in value. So, instead of determining values for infinity
a cap is used – say 10 years. This way, estimation becomes measurable. </div>
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Besides, Discounted Cash Flow is a method that uses
intrinsic valuation for companies that have predictable flow of cash. It is
used for companies that have been around for a while, though it is also used
for IT companies that are expected to grow swiftly. This means, when a start-up
or developing firm is evaluated, the results could go right or horribly wrong!
As an investor, you must be able to weigh your options and prepare for both,
says <a href="http://www.matthewroddan.com/">Matthew Roddan</a> of <a href="http://projectninetynine.com/">Project Ninety Nine</a>. This way or that,
evaluating an investment is important for any investor and determining the
right investments is done based on calculations that are probabilities and possibilities,
not a definitive. The calculated risk should be something you would be able to
manage, irrespective of whether it turns our favorable or not! </div>
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Anonymoushttp://www.blogger.com/profile/17993016399516251100noreply@blogger.com0tag:blogger.com,1999:blog-3159359942381752696.post-55494518533573335942015-10-02T03:33:00.001-07:002015-10-02T03:33:14.991-07:00What’s a Medium Term Note?<div dir="ltr" style="text-align: left;" trbidi="on">
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Medium-term note or MTN is when a debt note maturity period
is 5 – 10 years, though technically the repayment duration or maturity period
could be less than a year to a 100 years! These debt notes can be issued on
floating or fixed coupon basis. Floating rate MTNs are either simple where the
coupon is aligned </div>
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Euribor +/- basis points or it could be notes with complex
structure and linked to indices, swap treasuries, etc. If they’re issued to investors who aren’t
residents of the US, they’re termed "Euro Medium Term Notes". Issuing
MTNs to US-based investors calls for a US MTN program.</div>
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MTNs can come with fixed maturity date or come with put
options, embedded call wherein MTNs could be redeemed per pre-accepted terms or
speculations. MTN is usually issued for unsecured investment debts, with fixed
rates, though it offers flexibility to both the issuer and investor when it
comes to documentation and structure. While many use bank instruments for PPP
and have an idea of how MTNs work, many don’t know how it really works! It is
funny how they’re rising in popularity and many deploy it for different
purposes, without knowing how these instruments work or what it really is! <a href="http://www.matthewroddan.com/">Matthew Roddan</a> of <a href="http://projectninetynine.com/">Project Ninety Nine</a> explains MTNs are
a great way to get into PPP, especially since not many have the funds required
to invest in PPP from their resources. Since PPP is gaining exposure and many
would like to know if or not PPPs are what stuffs that make a mythical legend,
let’s understand MTNs better. </div>
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According to <a href="http://www.matthewroddan.com/">Matthew
Roddan</a>, many aspire to invest in PPP but end up being unable to do so by trusting
wrong people (brokers) or because they don’t have enough resources. The former
is truer and why many think PPPs don’t exist. So, let’s understand MTNs better
and how they can be used for PPP. MTNs are instruments of debt issued by banks
and are sold to investors with a good face value, annual interest rate and
maturity date. So, if you hold a note from Bank of America that’s worth 100
million, with interest rate of 7% each year, you will get 7 million till the
instrument matures, after which you can cash it for its worth! </div>
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While MTNs are very similar to debt notes, it is more
popular because of its price, flexibility, resale potential and option to be
bought at a discount instead of its face value. According to <a href="http://www.matthewroddan.com/">Matthew Roddan</a> from <a href="http://projectninetynine.com/">Project Ninety Nine</a>, MTNs are
available for more than fifty years and can effectively compete with any bank
instrument. Since they were available for discounted rate, it became popular
after “trading bank instruments” gained notoriety in the secondary market. PPP reign
began soon after and Internet has made it even more popular and widely
available. If you have an interest in PPP, MTNs <a href="http://www.projectninetynine.com/">Project Ninety Nine</a> are your go-to
option.</div>
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By <a href="http://www.matthewroddan.com/">Matthew Roddan</a></div>
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Anonymoushttp://www.blogger.com/profile/17993016399516251100noreply@blogger.com0