Hi,

Calculation should be on the previous Closing Price because we are essentially measuring the volatility vis-à-vis previous closing price (see the formula for R2 & R3).

However, one further refinement that is possible is to use Last Traded Price (LTP) instead of previous Closing Price in the entire calculation. After all, LTP is an actual price at which the final trade for the day took place while Closing Price is just a fictional price arrived at as Weighted Average Price of the last 30 minutes of trade. I think using LTP will make the calculation truly perfect, capturing volatility in its true essence. Though in practice the results may not be very different from using Closing Price as I have done above.

I guess any standard momentum indicator such as Relative Strength or RSI would be good enough, I haven’t thought much about it.

I dont know if something is being lost in translation, but the values I get using FCF of 9% and discount rate of 14% are very different. Guess we can agree to disagree here

Hii fellow members,

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On your point 1 & 2

point 1)The discounted cash flow (DCF) of an investment of 100 with a 9% per annum discount rate over 40 years and a terminal value growth rate of 0% is approximately 1,103

point 2) we are valuing an assets residual value with 9% return basis (and not our return expectation ) .The way I think is Imagine buying a house which will give rent for 9% for 40 years after which the building will not last .Today that house we are buying at 1 cr ,in 40 years the rental of 9 lacs at todays price is 11 cr (hence gross block of 2490cr at todays price is 27400 cr ! ) .

What is the problem in the above view is? 40 years is too long period hence bring it down to 25 years .Lets be conservative and apply further probability to it (whatever we think ) ,still it would be higher than todays market cap .

Whats the risk ?no one can predict long term .Hence we need to keep on evaluating /calculating terminal value every 2-3 years