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.
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