2.1.2. Cash-flow based valuation

Valuation based on what the company can generate in the future is the most common method of valuation. As in the analysis of investment/financing projects, these methodologies analyze the financial flows that the company can generate in the future and which can be made available to the holders of the capital of the company (equity and debt). There are quite large array of methodologies within cash-flow base methods; some of the most widespread are:

  1. Dividend Discounted Model – DDM.
  2. Discounted Cash Flow – DCF:
    1. Free Cash Flow to the Firm – FCFF.
    2. Free Cash Flow to Equity – FCFE.
  3. Enterprise Value Added – EVA.
  4. Adjusted Present Value – APV.

An important feature of these methods is the possibility to adapt to the available information, allowing a more detailed or simplified analysis depending on the quantity and quality of data available to the appraiser.

Next Section: 2.1.3. Market multiples