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Private Equity and Venture Capital in Europe
book

Private Equity and Venture Capital in Europe

by Stefano Caselli
November 2009
Beginner content levelBeginner
368 pages
11h 24m
English
Elsevier Science
Content preview from Private Equity and Venture Capital in Europe

13.5. Discounted Cash Flow Approach

The discounted cash flow (DCF) approach includes the determination of future cash flow generated by the company for 5 or 10 years. This is then discounted with an appropriate discount rate and summed. The final value of the company is obtained by combining the actual value of this flow and the net financial position. The net financial position will be deducted if it is negative and added if it is positive.

There are two main steps of valuation: cash flow determination and the identification of the discount rate to be used. Results from DCF are verified with comparables to check if the results can be compared with similar companies.

DCF is used because the value of a company includes the future cash flow even ...

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Publisher Resources

ISBN: 9780123750266