article thumbnail

Deja Vu #10: Valuation Theory is the Same for Businesses and Business Interests: V =f(CF, G, and R)

Chris Mercer

Business appraisers routinely use the discounted cash flow model to value entire businesses. Deja Vu #9: Pre-IPO Discounts Do Not Provide Valid Evidence for Marketability Discounts. The Discounted Cash Flow Model for Businesses. The Discounted Cash Flow Model for Interests of Businesses.

article thumbnail

Terminal Growth Rate – A Simple Explanation with Formula

Valutico

It’s used in financial modeling and valuation to estimate the company’s long-term value. In particular, the Terminal Growth Rate is used in a DCF analysis to help calculate the Terminal Value. Different industries have varying Terminal Growth Rates based on growth potential and market maturity.

Insiders

Sign Up for our Newsletter

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

article thumbnail

Mercer’s Musings #3: Marketability Discounts Re Two Hypothetical Minority Interests

Chris Mercer

In other words, value is a function of expected cash flow, growth, and risk. Every appraisal of every business entails an examination of expected cash flows (using income capitalization methods, discounted cash flow methods, guideline public company methods, or guideline transaction methods).

article thumbnail

29 Valuation Interview Questions and Answers: Mastering the Art of Crackling Interviews

Equilest

Uncover the intricacies of financial modeling, from understanding fundamental concepts like Free Cash Flow to Firm and Dividend Discount Model, to navigating advanced methodologies such as LBO and DCF. This financial metric is integral to Discounted Cash Flow (DCF) modeling.

article thumbnail

Issues faced when valuing a declining company

Andrew Stolz

When used to value a declining company, analysts will face special challenges as the characteristics of a declining company will cause some of the valuation model’s assumptions to break down. 4) Big payouts – dividends and stock buyback. (5) 4) Big payouts – dividends and stock buyback. (5) 3) Asset divestitures. (4)

article thumbnail

Fair Market Value and the Nonexistent Marketability Discount for Controlling Interests

Chris Mercer

The book value of the stock and the financial condition of the business. The dividend-paying capacity. Whether or not the enterprise has good will or other intangible value. Sales of the stock and the size of the block of stock to be valued. The earning capacity of the company.