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Expected future return

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Expected future return
The return that is expected to be earned on an asset in the future. Also called the expected return.


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] in a continuous time environment involves finding where the slope of the value function (the function describing expected future returns as a function of current cash) is equal to one (see Harrison 1985).
Since firms go bankrupt typically due to inability to pay debt, the major factor in determining whether a firm will go bankrupt is the availability of cash, while expected future returns should not have a significant effect on the probability of bankruptcy.
Companies that have defined benefit plans--that is, a plan that provides a specified benefit to a participant upon retirement--require the use of estimates, most notably in the areas of expected future returns on plan assets and expected inflation rates.
 
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