Valuation Techniques: DCF vs. Multiples Comparison PPT

This PPT slide, part of the 81-slide How to Prepare a Business Plan PowerPoint presentation, presents 2 distinct valuation methodologies: Discounted Cash Flow (DCF) and valuation by multiples, both expressed in EUR thousands.

On the left side, the DCF method outlines projected free cash flows over 5 years, starting with negative values in the initial years, indicating upfront investments or losses. The cash flows gradually improve, culminating in a significant continuing value of 11,000 in year five. The discount rates decrease from 65% in year one to 25% in years 4 and five, reflecting a diminishing risk perception over time. The discount factors, derived from these rates, are used to calculate the present value of future cash flows, resulting in a total entity value of 2,500 after accounting for debt.

The right side illustrates the valuation with multiples approach, focusing on the profit for the relevant period in year five. It shows a profit of 905, which is multiplied by a factor of 43, yielding a valuation of 38,900. The slide also incorporates a discount factor based on an internal rate of return (IRR) of 65% for 5 years, leading to a total value of 3,190.

This slide effectively contrasts 2 valuation techniques, highlighting their methodologies and resulting values. It provides a clear framework for understanding how different approaches can yield varying valuations, which is crucial for decision-making in investment or acquisition scenarios. The visual representation aids in grasping the complexities of financial valuation, making it a valuable resource for executives considering strategic financial assessments.

This slide is part of the How to Prepare a Business Plan PowerPoint presentation.

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