The interrelationships between cash flows, corresponding discount rates and values follow certain rules, knowing which one can quite easily and correctly find out value of given cash flow using the discounting-by-components framework, or to find the correct formulation of the discount rate for...

The paper discusses common mistakes made by financial profession when valuating cash flows by applying inconsistent weighted average discount rates to cash flows to equity, to unlevered firm, to levered firm or other complex cash flows not regarding their type (constant or growing perpetuities,...