This intrinsic value template will demonstrate the calculation of intrinsic value using the discount rate method and certainty factor method.
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The intrinsic value of a business (or any investment security) is the present value of all expected future cash flows, discounted at the appropriate discount rate. Unlike relative forms of valuation that look at comparable companies, intrinsic valuation looks only at the inherent value of a business on its own.
The task of risk adjusting the cash flows is very subjective and a combination of both art and science.
There are two main methods:
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