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A Tutorial on the Discounted Cash Flow Model for Valuation of Companies

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Author Info

  • Jennergren, L. Peter

    ()
    (Dept. of Business Administration, Stockholm School of Economics)

Abstract

All steps of the discounted cash flow model are outlined. Essential steps are: calculation of free cash flow, forecasting of future accounting data (income statements and balance sheets), and discounting of free cash flow. There is particular emphasis on forecasting those balance sheet items which relate to Property, Plant, and Equipment. There is an exemplifying valuation included (of a company called McKay), as an illustration. A number of other valuation models (abnormal earnings, adjusted present value, economic value added, and discounted dividends) are also discussed. Earlier versions of this working paper were entitled "A Tutorial on the McKinsey Model for Valuation of Companies".

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File URL: http://swoba.hhs.se/hastba/papers/hastba0001.mck.xls
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File URL: http://swoba.hhs.se/hastba/papers/hastba0001.pdf
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Bibliographic Info

Paper provided by Stockholm School of Economics in its series Working Paper Series in Business Administration with number 1.

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Length: 55 pages
Date of creation: 18 Jun 1998
Date of revision: 22 Jun 1999
Handle: RePEc:hhb:hastba:0001

Contact details of provider:
Postal: The Economic Research Institute, Stockholm School of Economics, P.O. Box 6501, SE 113 83 Stockholm, Sweden
Phone: +46-(0)8-736 90 00
Fax: +46-(0)8-31 01 57
Email:
Web page: http://www.hhs.se/
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Related research

Keywords: Valuation; free cash flow; discounting; accounting data;

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Cited by:
  1. Jennergren, L. Peter, 2009. "On the forecasting of lease expense in firm valuation," Working Paper Series in Business Administration 2009:12, Stockholm School of Economics, revised 02 Dec 2009.

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