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Dear sir,
In valuation of shares methods, we have discounted cash flow basis (PV of future cash flows) method.
How this method gives the maximum value of shares as compared to dividend valuation model?
The examiner of F9 is not interested in it because it is not widely used?Thanks,
The dividend valuation formula is arriving at the PV of the future dividends and gives the MV of the equity.
Discounting the total cash flows at the WACC gives a valuation of the whole business (just as discounting the cash flows from a project gives the value of the project). It is widely used, but it is more at P4 that this becomes relevant.
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