
94 The Financial Times Guide to Corporate Valuation
The DCF approach – only a calculation machine
As mentioned earlier, the McKinsey model, as well as all other valuation
models, is nothing more than a calculation machine, and the value that
emerges from the model is completely dependent on the value it has been
fed with. What does this mean? It is tempting to believe that provided
there are no computing errors or technical problems, the model always
gives a more or less correct company valuation. The reality is that the
model can produce any value at all even if applied correctly. The value is
completely dependent on how the input variables ...