I am valuing a company with significant negative free cash flows that then turn positive, may negative again and positive again. I discount the cash flows to get the value.
I pretty sure that the distribution around these numbers is skewed towards losses, and if I should put aside significant funding amount, which can be invested for the time being until the negative cash flows realize. The rate I can get by investing into some liquid instruments is barely 1%, and the ROCE is about 10%. The negative cash flows are really close , so I cannot invest the funds for time being and earn the ROCE on them (that would be investing into smth illiquid).
I wonder whether I should discount the negative cash flows with a different rate (1%) than the positive cash flows. (at hurdle rate).
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