Valuation by using a fuzzy discounted cash flow model

The objective of this paper is to extend the classical discounted cash flow (DCF) model by developing a fuzzy logic system that takes vague cash flow and imprecise discount rate into account. In order to explicitly discuss a more appropriate valuation model, uncertain information will be fuzzified a...

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Bibliographic Details
Published in:Expert systems with applications 2005-02, Vol.28 (2), p.209-222
Main Authors: Yao, Jing-Shing, Chen, Miao-Sheng, Lin, Huei-Wen
Format: Article
Language:English
Subjects:
Discounted cash flow (DCF)
Fuzzy number
Valuation
λ-signed distance method
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Summary:The objective of this paper is to extend the classical discounted cash flow (DCF) model by developing a fuzzy logic system that takes vague cash flow and imprecise discount rate into account. In order to explicitly discuss a more appropriate valuation model, uncertain information will be fuzzified as triangular fuzzy numbers to quantify and evaluate the intrinsic value of a company's financial asset under the framework of DCF approach. We will find that the fuzzy discounted cash flow (FDCF) model proposed in this paper is one extension of classical (crisp) model and should be more suitable to capture the elements of valuation than non-fuzzy models.
ISSN:0957-4174
1873-6793
DOI:10.1016/j.eswa.2004.10.003