How to Value a Company with the Discounted Cash Flow Model
Motley Fool Money
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Limitations of Forecast Period in Discounted Cash Flow Models
In discounted cash flow models, the forecast period or projection period is crucial as it's where assumptions for revenue are inputted typically for 5 to 10 years. Beyond 10 years, predictions become uncertain due to the difficulty in estimating a company's sales and margins accurately, reducing the confidence in long-term assumptions.
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