6
Discounted cash flow valuation
What topics are covered in this chapter?
Estimating the cost of capital – WACC
Calculating free cash flow
Computing terminal value
Discounting and final corporate value
The most important variables in a DCF analysis
The DCF approach – only a calculation machine
Checking your assumptions
Summary
The most commonly used standalone valuation
model is the discounted cash flow (DCF) model.
There are many different types of DCF model. Of
these, the most frequently used is the so-called
McKinsey model, which was first presented in
1990 by Tom Copeland, Tim Koller and Jack
Murrin in the book Valuation – measuring and managing the value of compa-
nies. This work has become something of a bible ...