A New Method of DCF Valuation
6 Pages Posted: 26 Sep 2006
Date Written: September 25, 2006
We present a method of computing a value of a company where cash flows are discounted using cost of capital variable in time. In a multi-stage approach the cost of capital depends on the current financial structure and future cash flows by means of a recursive backward scheme. The valuation resembles the replication method used in option pricing.
Keywords: cost of capital, discounted cash flow, valuation
JEL Classification: G12, G30, G32
Suggested Citation: Suggested Citation