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A strict net cash calculation would treat both amounts the same although the more recent contribution is worth about $83 less than the investment made more than 20 years ago, he said.
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He points to Intel's proxy statement (pdf), which breaks down its annual incentive cash bonus calculation into absolute financial, relative financial and operational components.
He subtracts only the maintenance cap-ex in his free cash flow calculation.
The result is pumped through a discounted cash flow calculation using a conservative 20% discount rate (the larger the rate the smaller the output of the working backwards process).
The parameters used in the discounted cash flow calculation are listed in Table 6.
The method for the discounted cash flow calculation in this study assumes 40% equity financing and 3 years construction plus 0.25 years start-up.
In 10 years, Mr. Fuller said, venturing a prediction, business schools will not teach topics like discounted cash flow calculations but will instead teach executives how to analyze their options.
It is common in engineering economic analysis (White et al. 2010) to employ discounted cash flow calculations.
The resulting capital investment, project, and operating cost estimates were translated into discounted cash flow calculations.
There may be some, but it should not be used in the cash flow calculations.
Based upon my free cash-flow calculations, the stock is trading at the higher end of my $43 to $54* per share fair-value range.
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