Revisiting discounted cash flows model as a capital budgeting decision tool

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dc.authorid0000-0002-7981-3121
dc.authorid0000-0002-7981-3121en_US
dc.contributor.authorTeker, Suaten_US
dc.date.accessioned2023-02-03T10:11:58Z
dc.date.available2023-02-03T10:11:58Z
dc.date.issued2020-12-31
dc.departmentIşık Üniversitesi, İktisadi ve İdari Bilimler Fakültesi, Ekonomi Bölümüen_US
dc.departmentIşık University, Faculty of Economics and Administrative Sciences, Department of Economicsen_US
dc.description.abstractPurpose- In thisstudy, the classical discounted cash flows (DCDF) model is revisited and the input factors of the model are analysed in details. Methodology- A model analysis approach is used in this research. The fundamental assumptions and the input factors (cash flows, time period, risk, discount rate, etc.) of DCF model are questioned. Findings- NPV and IRR are two methods using discounted cash flows and oftenly applied for capital budgeting decisions. The assumptions used in the DCF analysis are very strong and not fitting well in the reality of practical life. Economic life of the project may be much longer or shorter than projected in the analysis. The computation of discount rate bases on subjective interpretations (weights of capital components, cost of debt, opportunity cost of equity). Estimation of cash flows is the most critical input of the analysis but generally the least weighted factor (CF or FCF, inclusion of only relevant cash flows, depreciation and interest expenses, installments, credit sales and purchases, etc.). Risk adjustment can be made either on the discount rate or expected cash flows. Moreover, the analysis of international capital investments makes the issue more complicated. Also, the inclusion of real options adds an economic value to the analysis. Conclusion- DCF is not straight forward a capital budgeting model anyone can easily use. The application of DCF requires expertise and a picky view on details. Nevertheless, the acceptance of capital investments utilizing DCF method can not be independent of overall company strategic goals.en_US
dc.description.versionPublisher's Versionen_US
dc.identifier.citationTeker, S. (2020). Revisiting discounted cash flows model as a capital budgeting decision tool. PressAcademia Procedia, 12(1), 60-63. doi:10.17261/Pressacademia.2020.1349en_US
dc.identifier.endpage63
dc.identifier.issn2459-0762en_US
dc.identifier.issue1
dc.identifier.startpage60
dc.identifier.urihttps://hdl.handle.net/11729/5339
dc.identifier.urihttp://dx.doi.org/10.17261/Pressacademia.2020.1349
dc.identifier.volume12
dc.institutionauthorTeker, Suaten_US
dc.language.isoenen_US
dc.peerreviewedYesen_US
dc.publicationstatusPublisheden_US
dc.publisherPressAcademiaen_US
dc.relation.ispartofPressAcademia Procediaen_US
dc.relation.publicationcategoryMakale - Ulusal Hakemli Dergi - Kurum Öğretim Elemanıen_US
dc.rightsinfo:eu-repo/semantics/openAccessen_US
dc.subjectDiscounted cash flowsen_US
dc.subjectDiscount rateen_US
dc.subjectCapital budgeting decisionsen_US
dc.subjectExpected cash flowsen_US
dc.titleRevisiting discounted cash flows model as a capital budgeting decision toolen_US
dc.typeArticleen_US
dspace.entity.typePublication

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