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By postulating a simple stochastic process for the firm's cash flows in which the drift and the variance of the process depend on the investment policy of the firm, author developed a theoretical model, determine the optimal investment policy and, given this policy, calculate the ratio of the current value of the firm and the current cash flow which is the "Cash flow multiplier". The main contribution of the paper, however, is empirical. The author obtained valuation equations that could potentially form part of a new valuation framework which does not require estimating future cash flows nor risk adjusted discount rates.
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