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The WACC as suggested here can be defined as “a multiplier” that together with the cash flows determines the value of firms!

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Academic year: 2021

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Appendix A

Multiples and DCF

There exists a large gap between multiples and DCF when speaking about the determination of the value of companies. Multiples value on past performance whereas DCF values on future performance. However one aspect both methods incur is interesting for further investigation. According to the author of this thesis there seems to be a relationship between the DCF and Multiples in that the DCF also uses a “multiple” when calculating the value of a firm. The DCF values firms by discounting the future cash flows to present values in dividing the cash flows by the WACC. The WACC as suggested here can be defined as “a multiplier”

that together with the cash flows determines the value of firms!

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