Originally published: 01/03/2018 10:59
Last version published: 02/03/2018 16:07
Publication number: ELQ-71416-2
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Business Valuation Free Cash Flow Method

Showing you how to calculate the value of a project or business using the free cash flow method.

This is a brief tutorial on business/project valuation using the free cash flow method. Using a hypothetical scenario, Matt walks you through an excel model adopting a screen-sharing method.

The scenario is as follows:
A hospital would like to determine if constructing a new outpatient orthopedic surgery centre would be a profitable operation. Their current facility offers some of the same or the same procedure with older technology, and it requires an overnight stay. So in this case, there will be some cannibalisation of their own business, and there will be some cost savings.

So this is a good example because it demonstrates some of the complexities of accurately predicting free cash flows. The key here is to do a flow of costs and a flow of revenues analysis in order to determine how costs and revenues will be affected by this new project or business.

Length: 10 minutes 59 seconds

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