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DCF Valuations I

DCF Valuations I. The DCF Value: Timing Question. Assume that you discount expected cash flows to equity at a cost of equity to get a value per share of $150 for 3M. That value is as of Right now A year from now At the start of this calendar year At the start of the next calendar year.

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DCF Valuations I

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  1. DCF Valuations I

  2. The DCF Value: Timing Question • Assume that you discount expected cash flows to equity at a cost of equity to get a value per share of $150 for 3M. That value is as of • Right now • A year from now • At the start of this calendar year • At the start of the next calendar year

  3. From Value today to Future Value • Now assume that you want to estimate the value of 3M a year from now (to put out as a target price). Assuming that you feel confident in your value of $150 per share, what would you estimate the value per share to be

  4. Expected Dilution? • Assume that you value a high growth company and that you discount the cash flows to equity back at the cost of equity to arrive at an equity value of $ 100 million. The firm has 10 million shares outstanding but you expect it to have to issue more shares (2.5 million) over the next few years to cover growth needs. The value per share for this company is: • $10/share (-$100/10) • $ 8 /share (=100/12.5) • Between $8 and $10 • More than $10 • Less than $8

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