Chapter 20 DCF Shortcuts

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Chapter 20DCF Shortcuts
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Level Perpetuity
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Growing Perpetuity
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Annuity with Finite Life
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Perpetuity w/ Escalation

• See Book
• Example

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Annuity with Finite Life
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Ellwood, Akerson DCF

• Ellwood - Developed formulas to convert Yield
  (discount) rate to a cap rate that explicitly
  reflects future income changes both on an
  overall and debt/equity basis (1959)
• Akerson - Rearranged formulas to cut down on the
  algebra required (1970)

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Ellwood, Akerson DCF

• In general, the advantages of all but the most
  basic mathematical shortcuts have been eroded by
  electronic technology to the point that they are
  becoming obsolete as valuation tools

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