A Tool Kit for Discounted Cash Flow Valuation: Consistent and Inconsistent Ways to Value Risky Cash Flows

18 Pages Posted: 1 Mar 2018

See all articles by Andreas Schueler

Andreas Schueler

University of the German Federal Armed Forces

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

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

Andreas Schueler (Contact Author)

University of the German Federal Armed Forces ( email )

Werner-Heisenberg-Weg 39
Neubiberg
Munich, 85579
Germany

HOME PAGE: http://www.researchgate.net/profile/andreas_schueler3

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