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Net Present Value Corporate Valuations

Business Valuations Using the Net Present Value Method

The Net Present Value Method (NPV) for business valuations is one of the most theoretically sound methods for valuing the potential cash flows from operations of most businesses. It takes into account the weighted-average cost of capital (WACC) and assumes constant effective tax rates and capital structure going forward. This method also takes into account as much public information on comparable sale prices, corporate betas and potential terminal growth rates as possible.

 

However, as in any valuation schema, predicting the future cash flows is difficult to estimate and often requires assumptions that can be altered according to potential changes in the company, the industry or the market in which you operate. When we perform any valuation for your business, we work to carefully consider such potentialities and routinely include statistical sensitivity analysis into our final calculation. This gives the corporation being assessed a proper range from which to judge the value of their business and gives management more power when it comes time to walk through buyer/seller negotiations.

 

The proper valuation of your business is critical for the sale, divestiture or granting of employee stock options. Our expert advisory services will help you throughout every stage of the process.