Main ways to put a value on a company
Question
What are the principal methods for valuing a company?
Short answer
Intrinsic, relative and asset-based. A DCF discounts projected free cash flows at the cost of capital; relative valuation applies multiples such as P/E or EV/EBITDA from comparable firms or past deals; asset-based methods use book, replacement or liquidation value, and an LBO analysis gives a buyer's price. In practice several are combined into a range.
Adapted from Crack, Heard on the Street, Q5.4.2, p.52; question and answer rewritten by SelfMadeQuant.com.
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