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Journal: Science and world (Vol.2, No. 37)

Publication Date:

Authors : ;

Page : 8-16

Keywords : investment mathematical model; cash flow matrix model (CFM); model of cash flow discounting (CFDM); payback period; risk / opportunity of investment payback; average payback period; payback period and period of investor’s active life; golden ratio;

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The previous article (in 5 (33) issue of Science and World) announced the original cash flow model (CFM), suggested by the author, which allows overcoming the restrictions of traditional model of cash flow discounting (CFDM) in the field of investment evaluation and classical assets evaluation, including domain language (of investment evaluation, assets evaluation), non-adequate for customers. Customer, ordering evaluation, does not think in relation to terms of profitability percent. Their language is, first of all, measured (by data of accounting, management accounting) payback period. Profitability occurs as a procedure, comparing the possible (alternative) investments. However, the modern evaluation offers customers discounting ? the language, convenient only for those engaged in evaluation. This means that we do only what we can, not what customer needs. Then customer may be accused of ignorance. At the same time, as usual, customers are more successful than appraisers are. That is why, for an appraiser not to be just a doer, it is necessary to follow the common practice. Evaluation (including investment evaluation) is applied science, leaving no place for metaphysics. This article presents the opportunities of CFM in variants determining cash flow current value, omitting human error on all CFD rate constituents (risk free, risk-related and inflationary). Moreover, CFD rate transfers from a tool for current value assessment to an index for comparison of alternative investment.

Last modified: 2017-02-08 20:54:32