Just to remind you if you are looking at your property for example you could go to bottom up and try and value it based on the cost of bricks and mortar all right that’s quite an S at approach when applied to a company that’s not today’s video you could look at similar houses in the street fine work out of yours is worth something similar I’ll be a multiple based approach using company.
jargon and we’re not covering that one here either what we’re going to do is look at a company a bit like a property for point of view of how much money it will generate in the future some people value properties by saying let’s just look at the rental income we can squeeze out this thing in the future bring that together and come up with a number well back in companies speak is called discounted cash flow all right and that’s why we’re going to focus on here so with no more ado let’s imagine.
very simple scenario little bit of math coming upset’s imagine that we have a company with a five-year life they also straight away that’s artificial or the whole of discounted cash flow involves making some quite big assumptions at the end I’ll explain which ones you need to do more work on in practice so how do you go about it you would say right I reckon I can forecast the cash flows for this company of the next five years all right imagine I’ve managed to do that so I managed to forecasting sales costs.
To get to some kind of Prophet turn into cash flow and uncomfortable that i can say over the next five years so there’s one two three four five years very simple example the forecast cash flows are a hundred million a multimillionaires is always sterling our key right in the pound sign they’re just get annoying after awhile hundred million and a hundred million all right now it is a very simple.
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