Valuation Discounted Cash Flows - Basic Formula For Firm Valuation Using DCF Model

Basic Formula For Firm Valuation Using DCF Model

value of firm = 
\sum_{t=1}^n \frac{FCFF_t}{(1+WACC_{g})^t} + \frac{\left}{(1+WACC_{g})^n}

where

  • FCFF is the Free Cash Flow to the Firm (i.e. Operating cash flow minus capital expenditures)
  • WACC is the Weighted Average Cost of Capital
  • t is the time period
  • n is the number of time periods
  • g is the growth rate
  • value of firm is enterprise value

Read more about this topic:  Valuation Discounted Cash Flows

Famous quotes containing the words basic, formula, firm and/or model:

    There’s a basic rule which runs through all kinds of music, kind of an unwritten rule. I don’t know what it is. But I’ve got it.
    Ron Wood (b. 1947)

    Given for one instant an intelligence which could comprehend all the forces by which nature is animated and the respective positions of the beings which compose it, if moreover this intelligence were vast enough to submit these data to analysis, it would embrace in the same formula both the movements of the largest bodies in the universe and those of the lightest atom; to it nothing would be uncertain, and the future as the past would be present to its eyes.
    Pierre Simon De Laplace (1749–1827)

    My course is a firm assertion and maintenance of the rights of the colored people of the South according to the Thirteenth, Fourteenth, and Fifteenth Amendments, coupled with a readiness to recognize all Southern people, without regard to past political conduct, who will now go with me heartily and in good faith in support of these principles.
    Rutherford Birchard Hayes (1822–1893)

    The best way to teach a child restraint and generosity is to be a model of those qualities yourself. If your child sees that you want a particular item but refrain from buying it, either because it isn’t practical or because you can’t afford it, he will begin to understand restraint. Likewise, if you donate books or clothing to charity, take him with you to distribute the items to teach him about generosity.
    Lawrence Balter (20th century)