BU121 Lecture Notes - Lecture 13: Discounted Cash Flow, Operating Cash Flow, Cash Flow
Document Summary
It"s complicated, there is no strict formula. Based on assumption that value of business = sum of the present values of any expected future benefits income stream and/or liquidity event. Value determined as measure of net cost of assets, original amount invested or cost-to- duplicate". Doesn"t take into account any potential earnings. Discount for risk and time value of money. Investors will use a relatively high discount rate for risk involved: early development 50-70, market studies, testing prototypes, ltd. Manufacturer, 40-60: viable product and established market 35-50% Risk adjusted net present value probability of occurrence. If a new deal will go through or not, so the result will affect the cash flow. Venture capital method explanation in text *not tested* No hard and fast rules for valuing early stage companies. Valuation professionals need 3 things to value any asset. Too many unknowns there is no real income.
