Discounted free cash flow model as valuation of commonequity, Financial Management

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Explain the difference between the discounted free cash flow model as it is applied to the valuation of common equity and as it is applied to the valuation of complete businesses.

The Free Cash Flow Model values the entire business as a part of the procedure to value common equity.  The value of a complete business is the sum of the values of the income-producing assets, or operating, plus the value of the current assets or non-operating.  All that is necessary to utilize the Free Cash Flow Model to value a complete business then is to add the value of the company's operations to the value of the company's current assets.

 


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