What are four methods for estimating a target’s value?

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What are four methods for estimating a target’s value?

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What are four methods for estimating a target’s value?

Explanation & AnswerSolution by a verified expert

Explanation

The four methods of determining the target company's value are as follows-

Free cash flow corporate valuation method under Discounted Cash Flow(DCF) techniques includes valuing firms based on the present value of its free cash flows.
Compressed adjusted present value method under DCF techniques- In this method, the present value is estimated by discounting the free cash flows and tax shield using the unlevered cost of equity.
The free cash flow to equity method under DCF techniques includes estimating cash available to equity shareholders after all expenses and debt are paid.
Market multiple analysis- This method assumes that the target company can be directly compared to the average firm in its industry.

Verified Answer

The target company's value can be determined using the following four methods-

Free cash flow corporate valuation method under Discounted Cash Flow (DCF) techniques.
Compressed adjusted present value method under DCF techniques.
Free cash flow to equity method under DCF techniques.
Market multiple analysis.

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