The calculation formula is:
V=∑CFt/(1+i)
Where, V —— The value of the target company
CFt —— The free cash flow of year “t”
i —— Relevant discount rate
t —— Time since M&A
DCF method can be classified as two types according to different types of cash flow.
a)Fixed Rate of Growth Method, which assumes the same cash flow growth rate each year
b)Two-stage Growth Rate Method, which assumes the cash flow growth fast before some time point and remain stable thereafter
