Business, Management and Accounting
4 years ago

Unnecessary complications in company valuations lead to widespread errors.

IESE Research Papers
Valuing Companies by Cash Flow Discounting: Fundamental Relationships and Unnecessary Complications
Pablo Fernández

Paper Summary

Company valuation using discounted cash flows is like valuing government bonds but for companies. It's simple and clear in sections 1-3. However, valuations often get complicated with unnecessary additions like WACC, beta, and tax shields in sections 4-15. These extra complexities can lead to errors and confusion.

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