TABLE OF CONTENTS the universe is not only queerer than we suppose but it is queerer than we can suppose.
J.B.S. Haldane (1892 to 1964)
In fact, our ordinary descriptions of nature, and the idea of exact laws, rests on the assumption that it is possible to observe the phenomena without appreciably influencing them.
Werner Heisenberg (1901 to 1976)
Nature herself does not even know which way the electron is going to go.
Richard Feynman (1918 to 1988), The Character of Physical Law
To value a firm, it is necessary to construct the financial statements for the forecast period and estimate the appropriate cash flows from different points of view, namely the total point of view (the Free Cash Flow [FCF]) and the equity holder s point of view (the CFE). In this chapter we extend the simple example that was presented in Chapter Four by adding more complex assumptions to make the model closer to reality. [1] We assume that the reader is familiar with the tables in the simple example in Chapter Four. To facilitate the reading of this chapter and provide some continuity, we repeat some of the ideas, background information, and tables from Chapter Four. As discussed earlier in Chapter Four, the relevant financial statements are: the BS, the IS, and the CB. For the sake of completeness, although not necessary to our analysis, we derive the cash flow statement (CFS) according to Generally Accepted Accounting Principles (GAAP). For valuation...
