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How to Value a Company with the Discounted Cash Flow Model
Motley Fool Money
How to Estimate Free Cash Flow
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We defined free cash flow as the amount of excess cash flow left over after a company has reinvested to maintain and grow its business. So from no-pat, we have to subtract total reinvestment that we think the company is going to make in year one, year two, year three, all the way through your ten. And now you just need to discount the free cash flow in every year, year one to year ten, by your discount rate. These are estimated free cash flows and you're one to your ten. Now we just use a perpetuity formula to calculate the free cash flows you think the company will generate from year eleven until the end of time,. using a perpetuity
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