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III.

DCF Methods

Present value

Terminal value and interim


vale

Terminal value, TV, & interim cash


flows

Terminal value and interim cash


flows

Example III.1,
Project V-Plus

annual cash flows, Project VPlus

annual debt schedule, Project V-Plus

annual discounting, Project


V-Plus

terminal value estimates,


Project V-Plus

A. NPV

NPV/WACC Example

NPV Rule

Pros and cons of NPV

B. The internal rate of


return, irr

irr Rule

Graphically

Graphically, many projects

Cons of irr

C. APV: Adjusted Present


Value

Finding NPV(S )
O

proof APV=NPV

APV Example

APV Example

Finding NPVF

We look at the debt tax


shield case

APV Example

APV Example

APV Example

Pros and cons of of APV

D. FTE: Flow-to-Equity

FTE Example

FTE Example

Proof FTE yields same as


NPV

Pros and cons of of FTE

E. CCF Method

CCF

CCF Example

CCF Example

CCF Example

Does CCF=NPV?

Pros and cons of CCF