DCF WACC Simplified

DCF analysis uses forecasts of future free cash flows and discounts them using WACC to arrive at a present value estimate. There are several variations in assigning values ​​to cash flows and the discount rate in a DCF analysis. But while the calculations involved can be complex, the purpose of DCF analysis is to estimate how much money an investor would receive from an investment, adjusted for the time value of money.

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The DCF method Simplified Weighted Average Cost of Capital (WACC) is a company valuation methodology that is based on estimating the value of the company as the sum of the present value of future cash flows, discounted at the appropriate discount rate, using the WACC as a discount rate. It is often used in situations where the company has a stable financial structure and its cost of capital remains constant over time. This simplified approach can be used when the basic assumptions, such as the growth rate of cash flows, the discount rate and the capital structure, are relatively stable over time.