Free Cash Flow as Value Criterion Message Board

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Strategies & Market Trends : Free Cash Flow as Value Criterion

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To: Reginald Middleton who wrote (134)	11/4/1997 1:00:00 PM
From: Pirah Naman	Read Replies (1) of 253

> The oppurtunity cost of the individual is the oppurtunity cost of investing in XYZ corporation. It certainly does affect the value of the cash flows generated. We are in full agreement on this. > has a illustrative generic risk figure of 50% (equivalent to the return we would expect to get out of this company in order to be compensated for the risk over and above the risk free rate The "we" in the above refers to YOU. I may have different expectations. > If both companies generated $50 of cash flows for that year, which investment would be of the highest quality? $50 in my pocket is $50 in my pocket. I fully agree that the rational investor would choose the instrument more likely to give a set return. I can even see you attempting to quantify the risk in this way. But what you are essentially doing is estimating the return you feel confident in expecting given your perception of the risk - not the value of the actual return. > the individual's oppurtunity cost is less for MSFT than it is for NSCP, No. And this is inconsistent with your earlier assertion that we are saying the same thing, that the individual's opportunity cost reflects the other instruments available to that individual. Which may well be independent of bonds, stocks, etc.

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