Walt Disney. The valuation method that I have selected to apply to
the company is the discounted cash flow method. It is a valuation
method that helps in determining the fundamental value of a
company. It determines the value of the company on the basis of the
anticipated future cash flows. It relies on the financial numbers or the
actual cash flow that is generated by the company. One of the main
benefits of selecting the discounted cash flow method for Walt
Disney is that it allows the valuation of all the free cash flows in the
future years, thereby providing an intrinsic or true value of the
business (Laitinen, 2019). Discounted cash flow is very detailed in
nature. It makes use of specific numbers, including important
assumptions relating to a business, such as growth rate, cash flow
projections, and other important measures. Another significant
benefit of the discounted cash flow method is that it takes into
consideration the long-term values. The method assesses the earning
of an investment or a project over the entire economic life. It even
takes into consideration the time value of money. The discounted
cash flow method allows objective comparison. It enables analyzing
different companies and arriving at a consistent and objective
valuation. The discounted cash flow method also does not require the
use of any comparable. There is no need to compare the market value
with other similar companies.
Choosing the discounted cash flow method will enable Walt Disney
to take into consideration more number of variables that might or
might not remain the same. It includes variables such as growth rates,
margins, as well as debt repayment. The economic condition of all the
companies has been greatly affected by the pandemic situation. The
current uncertainty in the economic conditions is likely to have a
significant impact on the projected cash flows of the future.
Moreover, as the global economy is not yet stable and the future
projected cash flows are uncertain, the discounted cash flow method
seems to be the best valuation method for Walt Disney. a
References
Laitinen, E. K. (2019). Discounted Cash Flow (DCF) as a measure of
startup financial success.
