Comment, question or quotation of the day
05-06-2020 : Quote of the day
“Stop yearning for what you don’t have, and you’ll ruin the economy.”
04-06-2020 : Question from a follower of the Vernimmen.com Facebook page
"When calculating the value of a business or the NPV of an investment, are negative cash flows also discounted? If so, what is the logic behind this discounting? Because normally when you discount a positive free cashflow by the WACC, it's to remunerate the capital providers, isn't it?"
We also discount negative cash flows. Indeed a negative flow corresponds to a financing need that will have to be found, but as it does not occur immediately, but later, it is normal that it is discounted, i.e. its present value is depreciated in relation to its nominal amount to take into account the fact that it is an advantage for us to have to spend this sum later, and not now.
Have a nice day.
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The Vernimmen.com Letter
Number 130 of June 2020
News : What's new and what's the same in the rankings of the world's largest market capitalizations since 2000
Statistics : Corporate income tax in the world
Research : Long-term relationships in bank loan agreements
Q&A : How does European law define companies in financial distress?