Title:
Transversality and the Stochastic Nature of Cash Flows
Author(s):
Kruschwitz, Lutz; Löffler, Andreas
Year of publication:
2015
Available Date:
2015-08-31T12:13:43.433Z
Abstract:
We show that a transversality condition is necessary when it comes to valuing
a company with an infinite lifespan. Without transversality the firm value
cannot be uniquely determined. Also, an assumption on a lower bound of cash
flows is necessary to achieve the desired result. We discuss four different
stochastic cash flow processes and analyze to what extent the processes
associated with these enterprise values satisfy the transversality condition.
Keywords:
Business Valuation
Stochastic Cashflows
Infinite Lifespan
Transversality
DDC-Classification:
330 Wirtschaft
Publication Type:
Wissenschaftlicher Artikel
Also published in:
Modern Economy. - 6 (2015), 6, S. 755-769
URL of the Original Publication:
DOI of the Original Publication:
Department/institution:
Wirtschaftswissenschaft
Betriebswirtschaftslehre / Department Finance, Accounting and Taxation (FACTS)
Comments:
Gefördert durch die DFG und den Open-Access-Publikationsfonds der Freien
Universität Berlin