Three Innovative Methods for Evaluating Corporate Cash Flows: The Extended Net Present Value Criterion, the Smooth Pasting Condition, and the Markowitz Model

This chapter has the aim of providing a privileged perspective on cash-flow dynamics in the context of business analysis—whether evaluative or diagnostic—in general and comparatively across each business segment. In particular, the discussions presented focus on cash-flow volatility by adopting procedures that appear relevant and promising for the above purposes, whilst they are also attempting to adapt—with the auspice of contributing to scientific and technical process innovations on the topic—some models, typically applied to securities finance, more specifically to flows linked to business and the corporate finance. After an introduction to the issues addressed, three thematic sections propose an estimation method using the Extended Net Present Value (XNPV), a risk-weighting approach through the value matching criterion, and the smooth pasting condition. Finally, processes borrowed from fractal finance and an extension of the Markowitz model are applied.