Discounted Cash Flow (DCF) - Publications - Faculty & Research - Harvard Business School

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February 1991 (Revised November 1993)
Exercise

Valuation and Discounted Cash Flows

A set of five exercises in valuation of simple fixed income securities. No capital budgeting. Students use present value analysis to compute discounted cash flows. Situations/concepts covered include: future value; mortgage payment and repayment; calculating implicit... View Details

Keywords: Finance

October 1997 (Revised June 2000)
Exercise

Capital Budgeting: Discounted Cash Flow Analysis

By: Thomas R. Piper

This exercise comprises seven problems that collectively allow students to work through each type of cash flow that is encountered in capital budgeting. The instructor can also address such issues as product cannibalization and real options. View Details

Keywords: Capital Budgeting; Cash Flow

June 2002
Background Note

Note on the Equivalency of Methods for Discounting Cash Flows

By: William E. Fruhan Jr.

Uses a numerical example to demonstrate that when you discount the cash flows to capital from a project at the weighted average cost of capital, you get same net present value result as you obtain when discounting the cash flows to equity at the cost of equity. Also... View Details

Keywords: Capital Structure; Cash Flow; Cost of Capital; Equity; Valuation

winter 1996
Article

The Market Pricing of Cash Flow Forecasts: Discounted Cash Flow vs. the Method of Comparables

By: S. N. Kaplan and R. S. Ruback

Keywords: Price; Cash Flow; Forecasting and Prediction

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May 1995 (Revised October 1995)
Background Note

Introduction to Cash Flow Valuation Methods

By: Richard S. Ruback

Provides an introduction to three cash flow valuation methods. The three methods differ in their measure of cash flows and the discount rate applied to those cash flows. The names for the three methods correspond to the type of cash flow that is used in the valuation:... View Details

Keywords: Cash Flow; Valuation

August 2013
Background Note

A Simple Free Cash Flow Valuation Model

By: William A. Sahlman

Explores some of the issues involved in valuing cash flow streams. A simple model is presented that reveals the effect on value of changing assumptions about the appropriate discount rate, the level of profitability, the growth rate of sales, the asset intensity ratio,... View Details

Keywords: Cash Flow; Valuation

August 1976 (Revised October 1976)
Background Note

Cash Flow and the Time Value of Money

With the use of charts and examples, gives a detailed description of cash flows, the time value of money, and discounted cash flow analysis. View Details

Keywords: Cash Flow; Value

2010
Working Paper

Valuation When Cash Flow Forecasts Are Biased

By: Richard S. Ruback

This paper focuses adaptations to the discount cash flow (DCF) method when valuing forecasted cash flows that are biased measures of expected cash flows. I imagine a simple setting where the expected cash flows equal the forecasted cash flows plus an omitted downside.... View Details

Keywords: Forecasting and Prediction; Cash Flow; Cost of Capital; Performance Expectations; Prejudice and Bias; Valuation

24 Nov 2010
Working Paper Summaries

Valuation When Cash Flow Forecasts Are Biased

Keywords: by Richard S. Ruback

September 2002 (Revised April 2004)
Background Note

Valuing Cash Flows in an International Context

Addresses the question of how to value cash flows in an international context. Focuses on entrepreneurial ventures, but its content applies to finance issues that arise in established multinational enterprises. Addresses cash flows, discount rates, country risk... View Details

Keywords: International Finance; Valuation; Cash Flow

October 1987 (Revised January 2013)
Background Note

Note on Free Cash Flow Valuation Models

By: William A. Sahlman

Explores some of the issues involved in valuing cash flow streams. A simple model is presented that reveals the effect on value of changing assumptions about the appropriate discount rate, the level of profitability, the growth rate of sales, the asset intensity ratio,... View Details

Keywords: Cash Flow; Valuation

August 2020
Technical Note

Discounted Cash Flows (DCF) Valuation Methods and Their Application in Private Equity

By: Victoria Ivashina

June 2005 (Revised November 2006)
Background Note

Valuation Methods and Discount Rate Issues: A Comprehensive Example

By: Marc L. Bertoneche and Fausto Federicic

Presents a comprehensive review of the valuation methods based on discounting cash flows or value creation metrics and shows, through simple example and a straightforward "how-to-do" framework, the perfect consistency and identity of their results under similar... View Details

Keywords: Valuation

September 2016 (Revised February 2017)
Case

MyTime

By: Juliane Begenau and Robin Greenwood

Ethan Anderson, the CEO of San Francisco–based e-commerce company MyTime, must decide on the company's growth strategy. MyTime’s first product was a website and mobile app that offered consumers a convenient way to book appointments with local merchants throughout the... View Details

Keywords: Customer Valuation; Discounted Cash Flow; Software; Valuation Methodologies; Subscriber Models; Financial Management; Corporate Finance; Growth and Development Strategy; Valuation; Applications and Software; Information Technology Industry; North and Central America

November 2012
Exercise

Coca-Cola: Residual Income Valuation Exercise

By: Suraj Srinivasan

The exercise illustrates the use of the residual income (also known as the abnormal earnings) valuation approach. Students are asked to provide a valuation of Coca-Cola Company using the residual income valuation methodology and understand how it maps into the... View Details

Keywords: Business Analysis; Valuation; Residual Income Valuation; Accounting; Financial Accounting; Financial Analysis; Financial Statement Analysis; Financial Statements; Discounted Cash Flows

September 2012
Teaching Note

Stryker Corporation: Capital Budgeting (TN)

By: Timothy A. Luehrman

This case examines some parts of Stryker Corporation's systems and procedures for approving and authorizing capital spending of many different types, including buildings, machinery, and working capital for existing businesses, as well as transactions with third parties... View Details

Keywords: Capital Expenditures-equipment; Capital Expenditures-machinery; Internal Rate Of Return; Discounted Cash Flows; Net Present Value; Cost of Capital; Valuation; Cash Flow; System; Organizational Culture; Policy; Business Processes; Capital Budgeting

January 2018
Supplement

OldTown Berhad

By: Benjamin C. Esty and Greg Saldutte

In December 2017, Jacobs Douwe Egberts (JDE, a Dutch coffee company) made an offer to acquire OldTown Berhad (OTB), a Malaysian coffee company. Three large shareholders, representing more than half of the outstanding shares, have agreed to tender their shares and... View Details

January 2018
Case

OldTown Berhad

By: Benjamin C. Esty and Greg Saldutte

In December 2017, Jacobs Douwe Egberts (JDE, a Dutch coffee company) made an offer to acquire OldTown Berhad (OTB), a Malaysian coffee company. Three large shareholders, representing more than half of the outstanding shares, have agreed to tender their shares, and... View Details

June 2014 (Revised October 2015)
Case

Molycorp: Financing the Production of Rare Earth Minerals (A)

By: Benjamin C. Esty and E. Scott Mayfield

Molycorp, the western hemisphere's only producer of rare earth minerals, was in the middle of a $1 billion capital expenditure project in its effort to become a vertically integrated supplier of rare earth minerals, oxides, and metals. Yet it had just reported lower... View Details

October 2015
Teaching Note

Molycorp: Financing the Production of Rare Earth Minerals (A)

By: Benjamin C. Esty and E. Scott Mayfield

Molycorp, the western hemisphere's only producer of rare earth minerals, was in the middle of a $1 billion capital expenditure project in its effort to become a vertically integrated supplier of rare earth minerals, oxides, and metals. Yet it had just reported lower... View Details

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