Appraisal challenges in designing cash flows

Abstract

One of the determinants which determine the enterprise value by discounting cash flows is the projected value of cash flows in the forthcoming period. In order to project cash flows on more objective basis, estimators develop the strategic perspective of enterprise development on the basis of accounting data generated in the previous period and understanding the business environment of enterprises. This paper aims to highlight the difficulties faced by appraisers in predicting future cash flows. In addition, the paper will present a simple way of designing cash flows in terms of a stable debt/equity ratio.

Keywords

• cash flow
• enterprise value
• appraiser
• design
• subjectivity
• uncertainty