Discounted cash flow method

Save Share

This query is : Resolved

Karan Ranka (Querist)

20 November 2012 Dear All

Pls advice how pricing of shares is to be done under discounted Cash Flow Mehtod in case of newly incorporated company. 100% investment in the company is being done by a foreign company. There are no outstanding shares in the company thus making it impossible to do the valuation under DCF. RBI is not accepting any other Valuation except for DCF

Amol S Joglekar

Amol S Joglekar (Expert)

20 November 2012 Ask the management to give you the FUTURE CASH FLOWS for 5 years. (This is very important. Management normally tends to request you to decide the future cash flows. Please avoid doing it.) These future cash flows are then discounted at the rate appropriate to the said industry (ranging from 10 to 30). Accordingly calculate the value of share.

Karan Ranka

Karan Ranka (Querist)

20 November 2012 Sir what should be kept as the no of shares as there wont be any shares outstanding

Amol S Joglekar

Amol S Joglekar (Expert)

21 November 2012 Authorised capital. (As it is a NEWLY incorporated company)

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now