Corporate Finance: Instructor\'s Manual Applied Corporate Finance

Aswath Damodaran 487

Discounted Cashflow Valuation: Basis for Approach

• where,


• n = Life of the asset


• CFt = Cashflow in period t


• r = Discount rate reflecting the riskiness of the estimated cashflows

Value =

CFt

t= 1 (^1 +r)t

t=n

!

The value of any asset is the present value of the expected cash flows on the

assets.