Summary
This chapter included a lot of new and varied concepts, and you are encouraged to review it more than once. It is a very important chapter as it represents the final step before we present our recommendations to the decision-maker.
In this chapter, we have looked at absolute and relative methods of valuing a company. We have explained the time value of money and the different formulas used in calculating the EV and share price of a company. We have understood the concepts of free cash flow, WACC, and terminal value. We have also seen how to represent our results in a chart, which can be used as a simple visual aid for decision making.
In the next chapter, we will look at why it is necessary to test your model and how to apply a number of tools to test your model.
