DCF (Discounted Cash Flow)

DCF builds value from the operating model: forecast free cash flows for 5–10 years, calculate a terminal value, discount everything at the weighted average cost of capital. The output is mathematically precise and economically fragile — small changes in growth, margin, or terminal multiple produce large changes in value. In private M&A, DCF is rarely the binding valuation method but is consistently used as a sanity check against the multiple-based offer.