?? Discounted Cash Flow (DCF) Method — Demystifying Assumptions
When future potential matters more than current numbers, DCF is the go-to method.
It’s forward-looking, assumption-heavy, and often seen as the most defensible method — if done right.
?? What is the DCF Method?
It values a business based on the present value of expected future free cash flows, discounted back using a rate that reflects the business’s risk.
?? Formula (simplified):
DCF Value = Σ [FCF / (1 + r)^t] + Terminal Value
Where:
?? Key Assumptions to Get Right:
?? When to Use DCF:
?? Why it matters:
?? “DCF is like storytelling — but with numbers, discipline, and logic.”
??Next Up: Market Multiples Method — How Comparables Shape Perception
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