What is a company worth? The answer to this question can vary depending on who you ask and the purpose of the valuation. As a result, figures derived by an options trader, credit liquidator, and an acquiring firm will not only differ in amount but, more interestingly, in the methods used to reach them. While discounted cash flow methods are widely accepted as the most correct, many other methods remain popular despite serious technical shortcomings. IESE’s Pablo Fernández reviews the four main groups of valuation methods, then identifies the mistakes that are most common, offering managers a more comprehensive understanding of firm valuation, and a disciplined approach to properly navigate this challenge.
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