why take cash-flows ( FCF ) and not earnings ? how to choose an appropriate discount rate for valuing a financial services company ?

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As every one knows that the cash flow is very essential for any business concern, it may be both the cash inflows or cash uot flows that makes any organisation make or destroy.
because cash flow is treated as the life blood of the organisation without it no organisation can survive.
all incomes and expenditure is normally gained or spent in the form of cash and it is very importent that managing the cash flow is the big challenge for an finance manager.

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Can you explain how to derive cash flow and what are those things we can consider in preparation of Cash Flow
what are those diff betn cash n fund flow

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Here is how to pick a hurdle rate
Estimate the unlevered sector beta and lever it up to ur chosen debt ratio. Take the maximum marginal rate of tax never the effective rate of tax. Using the relevered beta take the 10 year govt bond rate as on the date of ur analysis and take the last five year avg return of the Nifty. This will help u estimate ke.
KD can be obtained by talking to ur banker as to what rate he will lend u the required loan. then compute the post tax cost of debt
then compute WACC. Hurdle rate will be automatically higher for projects that are riskier and safer for not so risky projects.

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