Professional Documents
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Finance for
Non-Financial Professionals
Module 4
Valuation Methods
1. Market Valuation
2. Multiples Method
3. Discounted Cash Flow (DCF) Analysis
Relationship between
NPV and IRR
IRR is the discount rate at which the NPV = 0
If the IRR is 21% and calculating the NPV
using a 21% discount rate, then NPV should
equal 0.
Excel has functions to calculate both NPV
and IRR.
Discount Rate
A monetization of risk associated with a
venture
Cash flows are discounted by this rate to
determine present value net of risk
At the lowest, we use inflation, at the highest,
we use speculated risk
For an existing business, we can use WACC
(the risk assigned by the market)