Pankaj Arora (Learner) (3134 Points)
12 March 2013Dear All
for valuation of pvt ltd company equity share as per DCF Method.
there is written that future cash flow should be discounted.
i want to know what is cash flow? shall i deduct outflow cash during the year from the inflow cash. or shall i consider only total inflow cash and than divide by number of shares.
CA Lokesh Pokharna
(CA (Ahmedabad Bhilwara Chittorgarh))
(4128 Points)
Replied 12 March 2013
net cash flows should be discounted for valuatuion.
Nakul Sharma
(CA FINAL)
(35 Points)
Replied 12 March 2013
Lokesh is absolutely right Pankaj, the net cash flow has to be discounted so as to judge what earning value does the share constitute in itself. For Example when you say the business is going to generate cash flows of Rs. 10,00,000/- per annum after acquisition of a certain business, and the same is expected till 10 years. Then the company shall discount 10,00,000 for 10 years at appropriate discounting factor ,thereby calculating the actual value that the share carries
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