Valuing companies by cash flow discounting: ten methods and nine theories
Article publication date: 2 October 2007
The aim of this paper is to answer the question: Do discounted cash flows valuation methods provide always the same value?
This paper is a summarized compendium of ten methods including: free cash flow; equity cash flow; capital cash flow; adjusted present value; business's risk‐adjusted free cash flow and equity cash flow; risk‐free rate‐adjusted free cash flow and equity cash flow; economic profit; and economic value added.
All ten methods always give the same value.
The disagreements among the various theories of firm valuation arise from the calculation of the value of the tax shields (VTS). The paper analyses nine different theories.
The paper is an analysis of ten methods of company valuation using discounted cash flows and nine different theories about the VTS.
Fernández, P. (2007), "Valuing companies by cash flow discounting: ten methods and nine theories", Managerial Finance, Vol. 33 No. 11, pp. 853-876. https://doi.org/10.1108/03074350710823827
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