... in response to changes in expected cash flows and the required rate of return:Factors that affect cash flows:[ ]- ),(+∆∆=∆ kCFEfV++∆∆∆∆=∆ ? - ),,,()( MANABINDUSRECONfCFEf 16Investment ... (cont’d)Rules regarding analyst compensation and ratings (cont’d)In 2002, the SEC implemented new rules:If a securities firm underwrites an IPO, it cannot use its analysts to promote the stock for ... 38Valuation of a Securities Firm (cont’d)Factors that affect the required rate of return by investors:The risk-free rate is positively related to inflation, economic growth, and the budget deficit...