Valuation: Methods and Models in Applied Corporate Finance

6. Putting It All Together: Valuation Frameworks

6.1 Introduction

We are now at the final stage where we can put all of the pieces in the previous chapters together to do a valuation of any asset, whether that asset is a firm or a project, or whether that asset is public or private. The main tool for doing this valuation is the present value relation:

where E(CF₁), E(CF₂), and so on are expected future cash flows, r denotes a discount rate, and Value₀ is the value of the project that we are trying to measure. In the previous chapters, we discussed how to calculate the cash flows and the discount rates. Each year we construct projected financial ...