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> enterprise value, which is the correct measure of the value of a business Not even Warren Buffet thinks this. In economics, the correct measure of a value of
by cynicalkane 10y ago
> enterprise value, which is the correct measure of the value of a business
Not even Warren Buffet thinks this. In economics, the correct measure of a value of a business is the future discounted expected value of cash flow and external utility. There's almost no way to measure this directly so major simplifying assumptions are made when applying this definition in practice.
- berberous 10y agoI think his point is that DCF of a company's free cash flow is an attempt to estimate enterprise value, not equity value.
- kgwgk 10y agoYou can use either the cash flows to equity or the cash flows to the firm to calculate the value of equity (ex-non-operating-cash) or the enterprise value.