A company's profit after tax (or net income) is quite an arbitrary figure, obtained after assuming certain accounting hypotheses regarding expenses and revenues. On the other hand, its cash flow is an objective measure, a single figure that is not subject to any personal criterion. In general,...

The net income of a company in a given year is an arbitrary number which depends on several decisions on the accounting of expenses and revenues. By contrast, each cash flow (money going out of the cash of the company into someone's pocket: shareholders, debt owners...) is a single number not...

Company valuation using discounted cash flows is based on the valuation of the Government bonds: it consists of applying the procedure used to value the Government bonds to the debt and shares of a company. This is easy to understand (sections 1, 2 and 3). But company valuation is complicated by...

This paper shows 10 valuation methods based on equity cash flow; free cash flow; capital cash flow; APV (Adjusted Present Value); business's risk-adjusted free cash flow and equity cash flow; risk-free rate-adjusted free cash flow and equity cash flow; economic profit; and...

This paper explores the discounted cash flow valuation methods. We start the paper with the simplest case: no-growth, perpetual-life companies. Then we will study the continuous growth case and, finally, the general case. lt;brgt;lt;brgt;The different concepts of cash flow used in company...

The correct way of valuing seasonal companies by cash flow discounting is to use monthly data. We may use annual data, but it requires some adjustments. We show that when using annual data in the context of the adjusted present value (APV), the value of the unlevered equity (Vu) and the value of...

The most used methods for valuing companies by Cash Flow Discounting are equity cash flow, free cash flow, capital cash flow and APV (Adjusted Present Value). Only APV does not require iteration All four methods, if properly applied, always give the same value. This result is logical, as all the...

To value shares there are two usual methods that, if properly applied, provide the same value: 1/ Present value of expected free cash flows (FCF) discounted with the WACC rate and then, subtract the value of debt; and 2/ Present value of expected equity cash flows (ECF) discounted with the Ke...

This paper presents a real valuation performed by a well-known investment bank, with two common errors and with two very different values for the equity of a firm:a) €6,9 million calculating the Present Value of expected free cash flows (FCF) discounted with the WACC rate and then, subtracting...