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 (136)	11/4/1997 1:46:00 PM
From: Pirah Naman	Read Replies (1) of 253

> Regardless of what the asset classification is, it can be campared to the risk free rate since the RFR is the lowest common denominator in asset valuation. So no matter what instrument is available to you, you will end up comparing it to the risk free rate if you want an empirical valuation. Correction - if you want an intrinsic valuation. Empirical means "based on observation or experiment, not theory." > Risk quantification is nearly an exact science. I think we have very divergent views of what constitutes science. But enlighten me - where is the predictability in this risk quantification? > The cost of capital = discuonting rate = oppurtunity cost of not investing in a risk free asset of MSFT is 11.1%. Not for me! > This is how one empirically determines oppurtunity cost That isn't empirical. If the model shows close correlation to real time data, then you can say that you are making predictions on the basis of an empirical model. Predictions on the basis of an empirical model are not themselves empirical. > Your method is subjective ALL predictions of the future are. Yours are also. You are merely using more parameters. Until such time as we can compare predictions to what transpires... > tempting one to think that they are doing better than they are. Luckily I buy that which I desire with dollars and not with "risk adjusted dollars."

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