Assessing Value Under Uncertain Conditions

As we have seen, DCF presents a straightforward method for calculating the intrinsic value of an SA under conditions where future inputs or outputs are relatively certain, such as in the example of a food company acquisition mentioned earlier in this chapter. In these situations, the information used is more or less readily available at the time of the analysis and is not expected to vary significantly. However, under conditions where information used to predict cash flows is highly variable, financial modeling techniques can be used to get a better understanding of the range of outcomes. The appropriate method to be used depends on the complexity of the assessment.