Business Valuation - Discounted Cash Flow
Source: KJE Computer Solutions
Business valuation is typically based on three major methods: the income approach; the cost approach and the market (comparable sales) approach. Among the income approaches is the discounted cash flow methodology - calculating the Net Present Value ("NPV") of future cash flows for an enterprise. As an alternative to the more abbreviated income capitalization approach, this methodology is more relevant where future operating conditions and cash flows are variable - or not projected to be materially consistent with current performance levels. This tool illustrates how cash flow, growth rates and capital assumptions impact valuation levels.