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Discounted Future Returns

9 十二月, 2015 - 12:14

Perhaps the most common, and conceptually best, technique for business valuation is calculation of the present value of expected future returns from the business. Although present-value computations are easy, determining the relevant inputs is not. Choices need to be made for:

  • the type of future return to be measured (income or cash flow);
  • estimates of the future amounts;
  • an appropriate discount rate;
  • the time period for the analysis; and
  • the estimation of a terminal value.

We consider each of these areas.