Appendix A: A Critical Examination of Discounted Cash Flow Valuation Methods
This book makes the case, not uncritically, for the usefulness of market metrics, as a rich, reality-based source of information relevant to the valuation of a business enterprise, and for the superiority of these metrics over other methods. In Chapter
2
, we have considered briefly and dismissed GAAP Book Value and Discounted Cash Flow modeling as inferior techniques for valuation purposes. In this appendix, we will expand on this position.
The End of Book Value
The case against Book Value is clearer, perhaps. Accounting methods were developed in an era when most business models were built on tangible assets, with solid valuations based on historical cost. In most cases, ...