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DCF, Other Non DCF , Special cases of valuation
What does DCF stand for and what is its core principle in valuation?
DCF stands for Discounted Cash Flow; it values an asset by discounting its expected future cash flows back to present value using an appropriate discount rate reflecting risk.
What is the Adjusted Present Value (APV) method in DCF valuation?
APV separates base-case NPV from financing side-effects value.
Which discount rate is most commonly used in DCF valuation of a firm's total operations?
The Weighted Average Cost of Capital (WACC) is used as the discount rate in DCF valuation of the entire firm, reflecting the blended cost of equity and debt financing.
What is the Weighted Average Cost of Capital (WACC) formula?
WACC = (E/V)*Ke + (D/V)*Kd*(1-T) blending equity and debt costs.
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