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Capital & valuation
Discounted cash flow valuation
Valuing a business as the present value of its forecast free cash flows plus a terminal value for everything after the forecast, discounted at the cost of capital.
Owned by: VP / CFOTest band: VP / CFO
In practice
The terminal value is usually most of the answer, and it rests on one growth assumption. Sanity-check a DCF against multiples before believing it.
The kind of thing the test asks
- In a typical DCF, most of the value comes from…
More in capital & valuation
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