lec_8_CC_Blackboard

lec_8_CC_Blackboard - Current Cost Model Review of...

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Current Cost Model
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Review of Valuation Frameworks to Date Present Value Model Wealth = Present value of future cash flows Income = Wealth (PV)
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Advantages: 1. Takes into account time value of money. 2. Decision relevant Disadvantages: 1. Subjective 2. Unfeasibale
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Net Cash Flow Model Wealth = Sum of cash balances at a moment in time Income = Cash inflows - cash outflows Advantages: 1. Factually-based 1. Feasible Disadvantages: 1. No matching of efforts and accomplishments
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Historical Cost Model Wealth = Owners’ equity (HC) Income = OE (assuming no additional I or W) = Revenues - Expenses + ‘s 1. Factually - based 1. Rational matching of efforts and accomplishments -’s 1. Ignores effects of changing prices
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General Price Level Model Wealth=OE (GPL) Income=Revenues(GPL) -Expenses (GPL) + ‘s 1. Provides improved measures of wealth and performance during periods of inflation -’s 1. Subjective 2. Not firm specific 3. Confusing
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Current Cost Model Current current price paid or exchange = received in exchange for an asset price
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Current exchange price Factor Entry Replacement market price cost Product Exit Market Market price value
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Valuation Concepts HC GPL RC Wealth Asset Valuation
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HC Wealth original concept money capital Asset original transaction valuation value
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This note was uploaded on 05/24/2008 for the course ACC 203 taught by Professor Choi during the Spring '08 term at NYU.

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lec_8_CC_Blackboard - Current Cost Model Review of...

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