3 ms·
28 billion seems a stretch, maybe 4B. How far into the future does a valuation speculate for?
by michaelbuddy 10y ago
28 billion seems a stretch, maybe 4B. How far into the future does a valuation speculate for?
- snaily 10y agoIt's not uncommon to project for infinity. When using the discounted cash flow (DCF) method you first use the current business plan to project cash flows (discounting for the fact that future money is worth less than money right now) for as long as you think is reasonable, sum them, then calculate some "final value" for the company beyond the business plan. Perhaps you think the company won't be around, so it is zero. Maybe you assume is steady-state forever, in which case the infinite sum of discounted cash flows turns into a geometric sum, which has a finite sum.