Question

A generalized model for the value of any asset is the present value of the expected cash flows:


Where:
N =life of the asset
CFt = cash flow in Period t
k=appropriate discount rate
Both stock and bond valuation models use a discounted cash flow approach, which includes the estimation of three factors (N, CFt, k).
Explain why each of these three factors is generally more difficult to estimate for common stocks than for traditional corporatebonds.


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  • CreatedDecember 17, 2014
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