Introduction to Valuation

Valuation is the process of determining the current worth of an asset or a company. There
are many techniques used to value companies, including discounted cash flow (DCF)
analysis, comparable company analysis (CCA), and precedent transactions analysis (PTA).

Discounted Cash Flow (DCF) Analysis

DCF analysis is a method of valuing a company using the concepts of the time value of
money. All future cash flows are estimated and discounted by using the cost of capital to
give their present values (PVs). The sum of all future cash flows, both incoming and
outgoing, is the net present value (NPV), which is taken as the value of the cash flows in
question.