That totally cash flow beginning belongs to the Discounted cash flow procedure of the assessment of company value.

Overview

The sense of the Discounted cash flow procedure consists in an exact (quantitative) determination of the tax benefit of a proportionate outside financing. Now the height of the tax benefit of the financing politics of the enterprise depends. In many cases only one taxation of enterprises (thus for example one body-expensively or trade tax) is subordinated, a taxation of the shareholders is neglected.

Now it is further accepted that the enterprise operates an market value-oriented financing in such a way specified (with an market value-oriented financing already today the future outside capital ratio, thus the relationship from outside capital to share value, will become in the entire future accurately given, deviations or other uncertainties impossible), then the use of the TCF beginning (total Cashf flow) offers itself. The use of the TCF beginning is bound to the condition of an market value-oriented financing - the enterprise is market value-oriented financed differently than, then the correct enterprise value will not agree with the TCF value.

Beside the TCF beginning one can likewise use the FTE entrance or the WACC equation. All three procedures lead to the same enterprise value. Which of the three methods one depends used on which possesses information of the Bewerter. With the TCF procedure it is accepted that the Bewerter knows expected cash-flow in the future and in addition the average capital costs. Both the WACC as well as the FTE procedure meet other acceptance regarding these information.

Equation

V^l= \ sum_ {t=1} ^T \ frac {E [FCF^l_t]} {(1+k^d_0) \ cdots (1+k^d_ {T-1})}

with:

• V^l value of the indebted enterprise
• k^d_t average capital costs of the indebted enterprise at the time t
• E [FCF^l_t] expected cash-flow of the indebted enterprise at the time t

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