A Tool Kit for Discounted Cash Flow Valuation: Consistent and Inconsistent Ways to Value Risky Cash Flows
18 Pages Posted: 1 Mar 2018
Date Written: January 1, 2017
Abstract
The DCF method or multiples are used to value companies in practice. Starting with the value additivity principle, the paper presents a general framework for DCF valuation. This framework allows defining stepwise and aggregated approaches to value risky cash flows and identifying inconsistent approaches. The framework helps to integrate sales, contribution margin, operating leverage, and financial leverage into valuation approaches and shows the assumptions implied when multiples are used.
Keywords: DCF Valuation, Cost of Capital
JEL Classification: G31, G32, G34
Suggested Citation: Suggested Citation
Schueler, Andreas, A Tool Kit for Discounted Cash Flow Valuation: Consistent and Inconsistent Ways to Value Risky Cash Flows (January 1, 2017). Available at SSRN: https://ssrn.com/abstract=3132243 or http://dx.doi.org/10.2139/ssrn.3132243
Do you have a job opening that you would like to promote on SSRN?
Feedback
Feedback to SSRN
If you need immediate assistance, call 877-SSRNHelp (877 777 6435) in the United States, or +1 212 448 2500 outside of the United States, 8:30AM to 6:00PM U.S. Eastern, Monday - Friday.