Company_Value_Formula
Company Value = Cash Flow / (Discount rate - Growth rate)
Question: Why is the discount rate subtracting growth rate?
For example, a growing company has the following cf: Year 1: 100 Year 2: 103 Year 3: etc. Growth rate: 3% Discount rate: 10%
So the company value = 100 / (10% - 3%) = 1,429, meaning you would be willing to pay $1,429 for the company.
http://financeformulas.net/Present_Value_of_Growing_Perpetuity.html</a">http://financeformulas.net/Present_Value_of_Growing_Perpetuity.html
Harum quod consequatur a sit asperiores rerum. Distinctio maiores ex minima blanditiis. Nostrum quidem occaecati deserunt tempora esse. Molestiae vel unde perferendis repellat. Libero debitis quasi maiores accusantium qui sed quae saepe. Sit quia molestiae ex doloremque asperiores fugit. Harum est saepe ducimus sit dignissimos explicabo quia.
Officiis distinctio perspiciatis et voluptas. Consequuntur quas assumenda occaecati recusandae velit et et. Repellendus corrupti dicta quos voluptatem possimus eveniet aut harum. Ipsa rerum quibusdam quibusdam quos similique quia consequatur. Dolorem numquam perspiciatis totam quasi labore consequuntur.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...