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What is a Discounted Cash Flows analysis?

Published on 18/08/2022
Contributor(s): Harold Grosfils

The DCF. There are a number of valuation methods that are used in practice and are commonly accepted. One of the most widely used is the discounted cash flow method, or DCF. Without going into too much detail, this technique allows a company to be valued on the basis of an estimate of its future income. This method is based on the assumption that the value of the company is equal to the sum of all its future cash flows available to the company and which are discounted.

The cash flows are estimated on the basis of the business plan, trying to make the forecasts as close as possible to reality, and the discount rate, called WACC in the context of this valuation technique, will be the subject of a subsequent article.

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