Stochastic discounted cash flow. A theory of the valuation of firms (Q2308885)

After more than a decade a second edition to this open access book is being published. The major addition is the inclusion of uncertainty in aspects of a discounted cash flow valuation. This approach includes the stochastic structure of future cash flows. The book begins with an exploration of the discounted cash flow model. It explores the role of conditional expectation, differentiating between classical expectation and a conditional expectation approach. Continuing in this manner, the authors consider the market value of the non-leveraged firm. In the case when cash flows are weakly auto-regressive, then the value is a multiple of the free risk flow. The work, inter alia, continues with a discussion on default. Chapters four and five consider corporate income tax and personal income tax, and the tax advantages of leveraged and non-leveraged firms. Throughout the book, there are sets of problems with associated hints. This book should be of interest to economists, especially in the field of finance.