Fundamental Value or DCF Approach to Valuation

Yannick Coulon
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Yannick Coulon: ESC Bretagne Brest

Chapter Chapter 3 in Small Business Valuation Methods, 2022, pp 71-108 from Springer

Abstract: Abstract This chapter defines fundamental value as the measure of a company’s future profitability. The discounted cash flow model is presented. It is used to calculate the present value of the projected free cash flows. The applicable discount rates are explained. The dividend discount model is also presented. Several short case studies and illustrations are included. Key takeaways on the DCF method and its limitations conclude the chapter.

Keywords: Cost of equity; Discounted cash flow (DCF); Discount rate; Dividend discount model (DDM); Fair market value (FMV); Free cash flow to equity (FCFE); Free cash flow to the firm (FCFF); Fundamental value; Net operating profit after tax (NOPAT); Non-cash working capital (NCWC); Projected cash flows; Required rate of return; Terminal value; Two stage DCF method; Weighted average cost of capital (WACC) (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-030-89719-2_3

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DOI: 10.1007/978-3-030-89719-2_3

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