The Business of Value Investing.pdf

Effective Business Valuation 97

Table 6.1 Discounted Cash Flows of 10 Percent Low - Risk Investment

Year Free Cash Flow Present Value of Cash Flows

2008 $ 50,000 $ 45,454

2009 $ 50,000 $ 41,322

2010 $ 50,000 $ 37,566

2011 $ 50,000 $ 34,151

2012 $ 50,000 $ 31,046

2013 $ 50,000 $ 28,224

2014 $ 50,000 $ 25,658

2015 $ 50,000 $ 23,325

2016 $ 50,000 $ 21,205

2017 $ 50,000 $ 19,277

2018 Return of $ 500,000 Investment $ 192,772

Total $ 500,000

Table 6.2 Discounted Cash Flows of 10 Percent Movie Store

Year Free Cash Flow Present Value of Cash Flows

2008 $100,000 $90,909

2009 $100,000 $82,645

2010 $100,000 $75,131

2011 $100,000 $68,301

2012 $100,000 $62,092

2013 $100,000 $56,447

2014 $100,000 $51,315

2015 $100,000 $46,650

2016 $100,000 $42,410

2017 $100,000 $38,554

2018 Sale Price of $400,000 $154,217

Total $768,674

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