Nicole Ticnang

BSACC 2-A

1. What is discounted cash flow method?

- Discounted cash flow (DCF) refers to a valuation method that estimates the value of an
investment using its expected future cash flows. DCF analysis attempts to determine the
value of an investment today, based on projections of how much money that
investment will generate in the future.

2. What is the formula for computing net present value?

- NPV = Cash flow / (1 + i)^t – initial investment

3. Why is discounted cash flow method important in business valuation?

- Discounted cash flow analysis can provide investors and companies with an idea of
whether a proposed investment is worthwhile. It is analysis that can be applied to a
variety of investments and capital projects where future cash flows can be reasonably
estimated.

4. What is fair market value?

- The fair market value is the price an asset would sell for on the open market when
certain conditions are met.

5. Why is market value approach important in business valuation?

- market value is important is because it provides a concrete method that eliminates
ambiguity or uncertainty for determining what an asset is worth. In the marketplace,
customers and sellers often have different perceptions of the value of a product.