DISCOUNTED CASH FLOW
1. If “it” does not affect the cash flows or alter risk (thus changing discount rates), “it” cannot
affect value.
2. For an asset to have value, the expected cash flows have to be positive some time over the
life of the asset.
3. Assets that generate cash flows early in their life will be worth more than assets that
generate cash flows later; the latter may however have greater growth and higher cash
flows to compensate. We are not going to look up the future.
Know we are going to separate them, first we are going to make the explicit forecast period and
depends how took companies to go stable. Explicit forecast is looking to the future and making
predictable. The continuing value is the cash flows in the. next year (not in the same year as C).
EQUITY VS FIRM VALUATION
1. If “it” does not affect the cash flows or alter risk (thus changing discount rates), “it” cannot
affect value.
2. For an asset to have value, the expected cash flows have to be positive some time over the
life of the asset.
3. Assets that generate cash flows early in their life will be worth more than assets that
generate cash flows later; the latter may however have greater growth and higher cash
flows to compensate. We are not going to look up the future.
Know we are going to separate them, first we are going to make the explicit forecast period and
depends how took companies to go stable. Explicit forecast is looking to the future and making
predictable. The continuing value is the cash flows in the. next year (not in the same year as C).
EQUITY VS FIRM VALUATION
