Pablo Fernandez discusses the need for iteration with many DCF analyses

BVWire–UKIssue #18-2
September 15, 2020

valuation profession news
discounted cash flow (DCF), discounted cash flow analysis

The new article, ‘Valuing Companies by Cash Flow Discounting: Only APV Does Not Require Iteration,’ may be downloaded at

Fernandez, professor of finance at IESE Business School, argues that the most used methods for valuing companies by DCF include:

  • Equity cash flow;
  • Free cash flow;
  • Capital cash flow; and
  • Adjusted present value (APV).

Only APV does not require iteration, he argues. And, he says, ‘[A]ll four methods, if properly applied, always give the same value. Many valuations are incorrect because the authors do not iterate and, therefore, the four methods do not provide the same value.’

Please let us know if you have any comments about this article or enhancements you would like to see.