A simplified version of the discounted free cash flow valuation model assumes a zero-growth perpetuity for future cash flows.This assumption is best applied to growth companies with stable cash flow patterns.

Question

Quizplus · Accepted Answer

The zero-growth perpetuity assumption in a discounted free cash flow valuation model is best suited for companies with stable, non-growing cash flows, not for growth companies, which typically exhibit increasing cash flows.

A Simplified Version of the Discounted Free Cash Flow Valuation