IDEAS home Printed from
   My bibliography  Save this paper

The Validity of Company Valuation Using Discounted Cash Flow Methods


  • Florian Steiger


This paper closely examines theoretical and practical aspects of the widely used discounted cash flows (DCF) valuation method. It assesses its potentials as well as several weaknesses. A special emphasize is being put on the valuation of companies using the DCF method. The paper finds that the discounted cash flow method is a powerful tool to analyze even complex situations. However, the DCF method is subject to massive assumption bias and even slight changes in the underlying assumptions of an analysis can drastically alter the valuation results. A practical example of these implications is given using a scenario analysis.

Suggested Citation

  • Florian Steiger, 2010. "The Validity of Company Valuation Using Discounted Cash Flow Methods," Papers 1003.4881,, revised Apr 2010.
  • Handle: RePEc:arx:papers:1003.4881

    Download full text from publisher

    File URL:
    File Function: Latest version
    Download Restriction: no

    References listed on IDEAS

    1. Beranek, William & Howe, Keith M, 1990. "The Regulated Firm and the DCF Model: Some Lessons from Financial Theory," Journal of Regulatory Economics, Springer, vol. 2(2), pages 191-200, June.
    Full references (including those not matched with items on IDEAS)

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arx:papers:1003.4881. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (arXiv administrators). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.