Deja Vu #10: Valuation Theory is the Same for Businesses and Business Interests: V =f(CF, G, and R)

Business appraisers routinely use the discounted cash flow model to value entire businesses. While a growing number of appraisers use a discounted cash flow model to value illiquid minority interests of businesses (22% according to a recent Business Valuation Resources Survey), the majority of appraisers continue to rely on restricted stock studies and pre-IPO studies in their marketability discount determinations. The previous nine posts in this Deja Vu series showed the uselessness of methods based on dated restricted stock or pre-IPO studies. This tenth and final post discusses the value of businesses and business interests using the discounted cash flow model.