Chapter 12

Doing a Discounted Free Cash Flow Analysis

In This Chapter

arrow Estimating the value of entire companies by using discounted free cash flow analysis

arrow Determining how to forecast cash flows from companies

arrow Finding out how to estimate a company's cost of capital

arrow Understanding the capital asset pricing model

arrow Finding out how to value a share of stock

The real meat and potatoes of investment banking involves developing and applying financial models. And financial models aren't plastic pieces you glue together with pungent-smelling glue. Financial models are built by running numbers to demonstrate the best ways to improve the efficiencies, net incomes, and valuations of businesses.

Investment bankers earn their big paychecks by showing CEOs, boards, and management teams that by issuing or buying back certain securities they've already sold, going public or going private, purchasing companies or spinning off divisions, and making other changes in the way the firm operates, the value ...

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