The Discounted Corporate Cash Flow (DCCF)
Application of DCCF in Capital Budgeting requires a more extensive appraisal of business venture, as the capital budgeting itself is being scholarly defined and referred to, in Theodore Chen’s (2006) statement: “don’t take capital expenditure evaluation lightly when acquiring fixed assets”. Indeed, DCCF in capital budgeting plays a crucial role and serves as a technical tool for an entrepreneur who is specifically on a start up business operation.
On the Capital Asset Pricing Model (CAPM) as introduced by Ravi Jagannathan and Iwan Meler (2002), discussed the classic rule of acquiring the Net Present Value (NPV) as the measure to obtaining the negative and positive effects of cash flow. Meanwhile, an earlier empirical finding on CAPM has found that cross-sectional returns bears no relationship to number of variables to predict stock returns (Stein, J. C. , 2001). As counter-claimed by Jagannathan and Meler, the CAPM method determines the risk free rate of premiums, meaning on the equity of the investor, in which the cost of capital enable to gain from discounts of cash flow.
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In which the developing countries, like the Philippines, are more vulnerable to the sudden impact of financial crisis as the money devaluation is greatly affected by foreign currency adjustments with the added inflationary effect to the domestic pricing of basic and industrial commodities. In the Philippines, the cost of capital depends upon the efficiency of production and the labor force. The realization of expenditure may have been defined by Theodore Chen (2006), as most of financial investments infuse on fixed assets, labor and equipment, and together with risks of managing the cash flow referring to the overhead of operation.