Abstract
This chapter outlines the link between the discounted cash flow (DCF) approach and the market approach. To do this, it applies the EV/free cash flow to firm (FCFF) multiple. The chapter, from discounted forecasted cash flows, i.e. from a DCF value, calculates the resulting (i.e. parallel/analogous) value multiple. The execution of a proper market approach valuation will force us to take a stance on all the complex issues of a DCF valuation as these models are each other's exact mirror image. Carried out correctly, the implementation of the market approach will require exactly the same effort and work, and exactly the same complex decisions and assessments with regard to input parameters such as growth, margins, capital requirements, risk exposure, etc., as that of a full-blown cash flow valuation.
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