Abstract
In this paper we provide a straightforward framework for valuing firms. Students and even practitioners often struggle with the details of the valuation process as commonly presented in finance textbooks. Using a numerical case example, we highlight some of the fundamental but often misunderstood valuation concepts. First, we discuss the connection among major cash flow identities. Next, we demonstrate the use of the adjusted present value approach to perform firm valuation. When the capital structure is non-constant, the adjusted present value method yields more accurate results than the traditional valuation model that uses the weighted average cost of capital.
Recommended Citation
(2026)
"Demystifying Free Cash Flow Valuation,"
Journal of Economics and Finance Education: Vol. 13:
Iss.
2, Article 5.
Available at:
https://scholarship.rollins.edu/jefe/vol13/iss2/5
