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a method for estimating a firm's enterprise value by discounting its future free cash flows.
Discounted free cash flow model
Discounted free cash flows model
PV(FCF) + Cashat time n - debt at time n/shares outstanding at time n
The cost of capital that reflects the risk of the overall business, which is the combined risk of the firm's equity and debt.
weighted average cost of capital (WACC)
An estimate of the value of a firm based on the value of other, comparable firms or other investments that are expected to generate very similar cash flows in the future.
Method of comparables
The tendency of individual investors to trade too much based on the mistaken belief that they can pick winners and losers better than investment professionals.
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