The Light Side of Valuation

While growth companies raise thorny estimation problems, we can navigate our way through them to arrive at values for these firms that are less likely to be contaminated by internal inconsistencies. This section describes the steps to follow in discounted cash flow and relative valuations of growth companies.

Discounted Cash Flow Valuation

The objective in discounted cash flow valuation is to arrive at reasonable estimates of the cash flows and discount rates. Therefore, the following sections describe some of the considerations that should enter into the process when we value growth companies.

Choice of Model

Chapter 2 described the choices we face with discounted cash flow models. We can either value the entire ...

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