Discounted cash flow (DCF) modelling is a core valuation technique used to estimate what a business, project or asset is worth today based on the cash it is expected to generate in future. A consultant will forecast revenues, margins, capex, working capital and tax, then discount those cash flows back using an appropriate cost of capital to reflect risk. This approach is powerful because it allows management to test different strategic choices — pricing, market entry, acquisitions, financing structures — and immediately see the value impact. It is widely used in transactions, impairment testing, investment approvals and even dispute resolution, where a transparent and auditable methodology is essential. A robust DCF model will be well-documented, sensitivity-driven and aligned with accounting and market assumptions, so that boards, auditors and investors can rely on it.
Frequently Asked Questions
When should I use DCF modelling for valuation?
