DISCOUNTED CASH FLOW ANALYSIS

•  Discounted cash flows analysis is meticulous but more conservative method or approach that can be used to determine the asset value for it clearly demonstrate the movement of the transactions.
•  In discounted cash flows method, the value of investment opportunities is highly dependent on the value that the asset will generate from now until the future.
• Discounted cash flows analysis can be done by determining the present value of the Net Cash Flows of the investment opportunity.
• The amount that should be included in determining the value of the asset is the amount of cash that will be available for the claims of the equity owners and creditors.
• The Net Cash Flows are the amounts of cash available for distribution to equity claim from the business or asset.
• For GCBO, the net cash flows generated will be based on Cash from Operations which are composed of the cash flows from operating and investing activities, since this represents already the amount earned or will be earned from the business and the amount that is required for you to infuse in the operations to generate more profit.
• There are two levels of Net Cash Flows: (1) Net Cash Flows to the Firm; (2) Net Cash Flows to Equity.
• The Net Cash Flows to Equity represents the amount of cash flows made available to the equity stockholders after deducting the net debt or the outstanding liabilities to the creditors less available cash balance of the company.
• Terminal Value represents the value of the company in perpetuity of a going concern business.
•  The net present value of the Net Cash Flows represents the value of the equity.
• Valuation is a sensitive and meticulous task for every analyst and investors
•  Financial Modelling is a sophisticated and confidential activity in a company or for an analyst.
• Information can also be considered as competitive advantage of a company or a person.