What is my company worth?
The capitalized cash flow method values your company’s equity value as a growing perpetuity following these steps.
Subtract an estimated growth rate from a blended cost of equity and cost of debt, otherwise referred to as the weighted average cost of capital (“WACC”).
- The WACC represents the rate of return specific to your company, and reflects the risk of investment in your company. The WACC was calculated using the capital asset pricing model (“CAPM”) for cost of equity, adjusted for the company’s size and company-specific risks; weighting of the company’s debt and equity; and an estimated cost of debt.
- The growth rate subtracted from the WACC represents your company’s expected long-term growth, which is assumed to be the growth rate of Gross Domestic Product (“GDP”) in the United States, around 3.00%.
Divide the expected free cash flow by step one.
Add the company’s cash balance as of today.
Subtract the company’s debt balance as of today.