DCF: present net debt or future?
Hi, when performing a DCF, once you get to your discounted Enterprise value and begin doing your equity bridge to get to the equity value. Do you use the current cash and debt the Company has TODAY or do you use the company's predicted cash and debt balance at the end of the forecasted period?
At first, I thought as we are valuing the company today, we should use today's cash and debt figures. However, now I'm thinking because our EV is based on the FUTURE discounted cash flows, to keep things consistent maybe we should also use the future cash and debt balance at the end of the forecasted period?
Thanks.
The only time I can think of that you’d want to go about valuing something the way you’re suggesting would be if using levered cash flows for the dcf, which is normally only done when valuing a bank or other financial institution.
Use the current data.
"What is the cash and debt as of the valuation date."
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