DISCOUNTED CASH FLOW AND BUSINESS VALUATION IN A NINETEENTH CENTURY MERGER A NOTE

Abstract

In 1889 the Shelton Iron, Steel and Coal Company Limited was incorporated to take over the assets and business activities of two existing companies. To guide the contracting parties in negotiating a price to be paid for the properties belonging to the Shelton Collieries and Ironworks an independent valuation was arranged by Deloitte, Dever, Griffiths & Co., later appointed auditors of the new company. The article comprises an appraisal of the valuation exercise, which is an early example of the use of a discounted cash flow technique to provide relevant information for a capital investment decision.