12/28/14

Let's say you use DCF which you give 20% weighting, then a comparable method like P/E which you give 40% weighting, etc. Do you get laughed at if you do this/

Comments (3)

12/28/14

I'm not too sure what the objective of this exercise is but when valuing a company you can use different approaches and weight them accordingly (obviously the weightings would need to equal up to a 100%). Or you can just use the other methods to validate (multiples to validate dcf etc).

Just make sure (in your case) since you are using an equity multiple that your dcf approach is on an equity level.

12/29/14

brianklk:

Let's say you use DCF which you give 20% weighting, then a comparable method like P/E which you give 40% weighting, etc. Do you get laughed at if you do this/


Bankers & expert witnesses do this shit all the time. They just give the highest weight to the method that gets them closest to the "answer" they are looking for.

Investors do something like this all the time as well, but almost never use DCF. Depending on the type of asset you are analyzing, you could do something like: give 50% to a NAV approach and 50% to a multiples approach. This is only applicable if you think both valuation approaches are equally rational. If they arent both rational, then only use the method that makes sense.

12/30/14

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