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These cash flows typically include operating income, tax payments, and changes in working capital and capital expenditures. b) Determining the Discount Rate: The discount rate, often the weightedaveragecost of capital (WACC), reflects the risk associated with the company’s cash flows.
These cash flows typically include operating income, tax payments, and changes in working capital and capital expenditures. b) Determining the Discount Rate: The discount rate, often the weightedaveragecost of capital (WACC), reflects the risk associated with the company’s cash flows.
These multiples, derived from the market values of comparable companies, are adjusted to account for differences in capitalstructure, growth rates, and other factors. Pros and Cons of the Comparable Companies Analysis Pros Cons Market-Based: Reflects current market conditions and investor sentiment.
Context of DCF: There are three main approaches to calculating a company’s value. the intrinsic or income-basedapproach, also known as an entity approach, then there is also 2. the asset-basedapproach also known as the cost-basedapproach, and finally 3. The first is 1.
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