ISSUES ON USING THE DISCOUNTED CASH FLOWS METHODS FOR ASSET VALUATION
ISSUES ON USING THE DISCOUNTED CASH FLOWS METHODS FOR ASSET VALUATION

Summary/Abstract: Valuation of an asset, a project or an entire company may be done following different approaches, one of them being the “Discounted Cash Flows”, based on financial mathematics. This method use various expected cash flows and, therefore, different discount rates are considered appropriate regarding the different related risks. This paper emphasizes the differences between calculations of the most used cash flow streams, i.e. Free Cash Flow, Capital Cash Flow and Equity Cash Flow. Regarding the companies' valuation using the discounting-based methods, many authors argue that no matter which expected cash flows is used, they provide the same results for the present value of the company. In this paper, we present the Discounted Capital Cash Flow valuation method, arguing that choice through a greater simplicity of calculations

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