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 129 of April 2020
News : In times of crisis, it is better to know which segment of the bond market you are in
Statistics : How the prices of some financial assets have evolved since early January 2020
Research : Bank credit after Lehman Brothers
Q&A : How to compute the Total Shareholder Return (TSR) when the company has bought back shares?
COMMENTS : Comments posted on Facebook