Discounted cash flow valuation

Discounted cash flow valuation forecasts cash flows available to the relevant claim holders, then discounts them using a rate consistent with their risk, currency and timing. Cash flows to all finance providers are commonly discounted at WACC to estimate operating enterprise value; equity cash flows use an appropriate cost of equity. Where value continues beyond an explicit forecast period, a justified terminal value or additional forecast is needed. Debt, surplus assets and other claims must be adjusted consistently when moving from enterprise to equity value.