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Discounted cash flow (DCF) is a technique for measuring whether future earnings from a project are worth the capital investment required to acquire them. Future earnings have, over the life of a project, to pay back the invested capital and also to pay interest on the outstanding capital at any time. The rate of interest which the future earnings are capable of paying on the capital invested is a measure of the profitability of the project and is called the DCF rate of return. The minimum acceptable DCF return is, of course, the rate of interest which the company has itself to pay for its capital. Thus DCF methods supply a sound means of separating sheep projects from goat projects. Most large U.K. companies now use DCF methods for project appraisal, but Courtaulds was one of the first to appreciate its use and is still one of the few to make DCF analysis obligatory for all projects submitted to the board. In this article, A. M. Alfred, chief economist of Courtaulds and one of those most involved in Implementing DCF techniques within his company, answers questions on why Courtaulds introduced the technique and what has been achieved by it.

The purpose of this paper is to compare three cultural approaches from anthropology and business literature: National Culture Approach (NCA), Corporate Culture Approach (CCA), and Transactional Culture Approach (TCA). The author grounds these approaches in different epistemological standpoints and locate them at different positions on the unity-infinity continuum. The author outlines their strengths and weaknesses, and offer the Douglasian Cultural Framework (DCF) as a transactional tool for cultural sense-making.

Reviewing conventional NCA/CCA frameworks reveals that while their simplicity renders them attractive to users, their assumption of stable, internally homogenous and coherent cultures has its limitations. Conversely, reviewing anthropology-based TCA literature reveals that while TCA overcomes some limitations of NCA/CCA frameworks, it also has its weaknesses – it overemphasizes “self-interest” as the preferred form of rationality, and some TCA scholars render cultural comparisons impossible by supporting cultural infinity. Finally, examining DCF reveals that it overcomes some limitations of NCA/CCA frameworks, while simultaneously advancing TCA. Nevertheless, DCF too has limitations which are also exposed.

Most NCA/CCA scholars support the “unity” argument of culture, while some transactional scholars support the “infinity” argument. DCF finds a perfect balance between the two through “constrained relativism”. Also, since DCF focuses on human transactions, it is not limited in its applications to specific levels and scales. It can therefore be applied to scenarios spanning across levels and scales. Finally, it offers a compromise between the differentiation and fragmentation perspectives of corporate culture, and brings out the best of the interpretivist and post-modernistic traditions.

The exposition of DCF opens up new avenues for research which have hitherto remained unexplored for want of appropriate frameworks, for instance the UN Peace Corps., NATO, Medecins Sans Frontiers, etc.

By focusing on human transactions, the paper allows for a much more dynamic conceptualization of culture as compared to static NCA/CCA frameworks.

The purpose of this paper is to focus on valuation practices applied by analysts to derive target price forecasts in Asian emerging markets. The key objective of this study is to understand valuation model preference of analysts and to compare the predictive utility of target price forecasts derived through heuristics-driven price-to-earnings (PE) model and theoretically sound discounted cash flow (DCF) model.

Each research report in the sample of 502 research reports has been studied in detail to understand the dominant valuation model (PE or DCF) applied by analyst to derive target price forecasts. These research reports have been issued on stocks trading in seven emerging markets including India, Malaysia, Indonesia, Taiwan, Philippines, Korea and Thailand during a six-year period starting 2008. Standard OLS and logit regression analysis has been performed to derive empirical findings.

The study finds that lower regulatory and reporting standards prevailing in emerging markets have no significant bearing on analyst choice of valuation model (PE or DCF). Time-series analysis suggests that emerging market analysts did not rely upon the usage of DCF model and preferred PE model during and immediately after the financial crisis of 2008. Multivariate regression results show weak evidence that PE model produces better results than DCF model after adjusting for the complexities associated with analyzing emerging market equities. The results imply that PE model, to some degree, is better equipped to capture market moods and sentiment in dynamic emerging markets rather than theoretically sound DCF model.

Most past studies on valuation model practices have focused on developed markets and this study provides a fresh perspective on analyst valuation model practices and performance in a new institutional setting of Asian emerging markets. The marginally better predictive utility of PE model as compared to DCF model is possibly a feature limited to Asian emerging markets.

The majority of institutional investors in Germany use the German income approach (GIA) while investors abroad prefer the discounted cash flow (DCF). The debate around the two methods has been largely theoretical, lacking large-scale empirical evidence. The paper aims to discuss this issue.

The analysis consisted of a performance comparison and hedonic regressions based on ordinary least squares. Fitted GIA and DCF values were obtained for all observations in the data set in order to eliminate distortions caused by different property characteristics in the two valuation sub-samples.

The research hypothesis, stating that the two methods result in statistically identical estimations of value, was rejected. The performance analysis showed that GIA valuations displayed smoother total return performance due to less volatile capital growth in comparison to DCF valuations. Comparing the fitted values obtained from the regressions showed that GIA valuations were on average lower than their DCF counterparts. The difference was small and both methods resulted in very similar fitted values. The difference between fitted values was not constant over time and decreased toward the end of the analysis period.

The research adds empirical arguments to the ongoing debate between GIA and DCF valuations. So far empirical proof has been scarce or one-sided.

This analysis is the first large-scale empirical comparison of the DCF and the GIA within the same market.

The main stakeholder of any valuation is the commissioning party and the outcome of the valuation process will determine for the commissioning party the value of the asset. The second key stakeholder is the valuer. Often, however, there is third stakeholder group, the lending institution. Lending institutions often provide financing to the buyer and the financing decision is often based on the hotel's valuation. Based on a questionnaire survey of hotel valuation stakeholders this study reports the findings as to the perceived suitability of the discounted cash flow (DCF) valuations in respect of hotel property. The findings reported here suggest that the majority of respondents supported the view that the DCF method was the most suitable method in relation to hotel valuations. However, there are indications that the recommended practice of the need for using supporting valuation approaches might not be widely observed or understood. In addition, there was a view among a significant minority of respondents that the DCF method was only applicable for those properties operating at the higher market levels.

PE and DCF are two popular valuation methodologies used by analysts to derive target price forecasts while performing equity research. Recent studies in developed markets show that analysts using sophisticated models like DCF produce more accurate target price forecasts as compared to heuristics driven models like PE. This study investigates if analysts using DCF outperform analysts using PE in an emerging market institutional set up.

An in-depth analysis of 392 equity research reports is conducted to understand the dominant valuation model used by analysts to derive target price forecasts. Research reports with clear mention of valuation methodology (PE or DCF) to derive target price forecast are used for the purpose of performing this analysis. Multivariate OLS and logit regression analysis has been conducted to investigate if analysts using DCF outperform analysts using PE to derive target price forecasts.

The study finds that analysts using PE produce significantly better short-term results than analysts using DCF i.e. when target price accuracy is measured anytime during forecast horizon of 12 months. However, there is no significant difference in target price performance or target price forecast error of PE and DCF model when analyst performance is measured at the end of the forecast horizon.

In contrast to results from developed markets, this study does not find evidence of superior target price performance of DCF. On the contrary, results suggest that PE outperforms DCF on the short-term measure of target price accuracy. This study shows that PE model which captures market moods and sentiments effectively is more suitable in dynamic, emerging markets like India.

Past studies have explored the performance of PE and DCF in developed markets and this study provides fresh empirical evidence on target price accuracy of valuation model from an emerging market like India. The superior short-term target price performance of PE as compared to DCF may be relevant exclusively in emerging markets like India.

The increasing complexity of investment properties has necessitated the application of more advanced valuation and analysis techniques. Following the property cycle of the 1980s/1990s, and the recommendations of several reporters, the DCF method has been promoted in Australia for certain income‐producing properties. The Australian Property Institute disseminated an information paper in 1993 that discussed DCF and suggested a performance approach to its application. Following this, a practice standard was produced in 1996 that was highly prescriptive but which contained a number of confusing passages. With the benefit of hindsight, its publication was premature and it was withdrawn from circulation. A rewrite was commissioned and an exposure draft was circulated in early 1999. It has been prepared as a performance standard in which the valuer is called on to follow a method while disclosing the specifics. However, a number of considerations remain to be finalised, for example, the application of the term cash flow to net operating income, income after finance and income after finance and tax. The preparation of standards is an evolutionary process and the present coverage of the DCF practice standard reflects the market in which it applies.

The purpose of this paper is to compare the value outcomes of the cost approach to the DCF profits method when valuing specialised property under different scenarios as a test for choice of method or model uncertainty; and to quantify valuation uncertainty under each scenario and to argue for an increasing adoption of the profits method of valuation.

A qualitative case study approach was used to analyse four physical valuations performed in practice under four specific scenarios, namely, a business-as-usual scenario, an underperforming business scenario, an expanding capacity scenario and a combined business-as-usual funding a start-up joint venture scenario.

The cost approach relative to the DCF profits approach consistently under-values specialised property under business-as-usual and business expanding scenarios while it over-values in instances of underperforming business scenario.

Financial institutions that predominantly uses or accepts the cost approach for valuing specialised property should consider adopting the DCF profits approach as the default approach when valuing for mortgage lending purposes. Business owners of specialised properties should contract practitioners knowledgeable and skilled in the application of the DCF profits method.

This paper quantifies choice of method or model uncertainty of four different scenarios of specialised properties where both the cost approach and DCF profits methods of valuation were employed. It suggests the adoption of the DCF profits method as the default method of valuation for specialised property.

The purpose of this article is to evaluate current techniques in capital budget decision making in Canada, including real options, and to integrate the results with similar previous studies.

A mail survey was conducted, which included 88 large firms in Canada.

Trends towards sophisticated techniques have continued; however, even in large firms, 17 percent did not use discounted cash flow (DCF). Of those which did, the majority favoured net present value (NPV) and internal rate of return (IRR). Overall between one in ten to one in three were not correctly applying certain aspects of DCF. Only 8 percent used real options.

One limitation is that the survey does not indicate why managers continue using less advanced capital budgeting decision techniques. A second is that choice of population may bias results to large firms in Canada.

The main area for management focus is real options. Other areas for improvement are administrative procedures, using the weighted average cost of capital (WACC), adjusting the WACC for different projects or divisions, employing target or market values for weights, and not including interest expenses in project cash flows. A small proportion of managers also need to start using DCF.

The evaluation shows there still remains a theory‐practice gap in the detailed elements of DCF capital budgeting decision techniques, and in real options. Further, it is valuable to take stock of a concept that has been developed over a number of years. What this paper offers is a fine‐grained analysis of investment decision making, a synthesis and integration of several studies on DCF where new comparisons are made, advice to managers and thus opportunities to improve investment decision making.

The Discounted Cash Flow technique has been widely adopted in industry as the preferred method of evaluating the profit earning potential of alternative projects when they are being selected for the investment of new capital. Business planners have accepted that a procedure which examines the forecast of the whole life of a project and derives an overall return on capital or a net present worth in actuarial terms, is a more accurate way of choosing between projects than a calculation of the profit/capital ratio in a selected year.