Advantages of using 2-stage Discount cash flow valuation compared to other valuation method .(10 marks)

Advantages of using 2-stage Discount cash flow valuation compared to other valuation method .

Expert Solution

The two-stage discount cash flow model allows for only two stages of growth: first stage with non-stable growth and athen steady state where the growth rate is stable and is expected to remain so for the long term.

Advantage of two-stage discount cash flow model compared to other valuation method :-

Two stage discounted cash ﬂow model provide flexibility in capturing changes in the underlying according to the firm character
Two stage discount model to examine the value of growth so that to compare the actual prices paid for growth.
At the time of smoothed historical growth rates in earnings and dividends were used as projected growth rates used this model.
Accurate and reliable method there is for making investment decisions to compare other models.
Other methods like relative valuation are easy to calculate but this method find best possible intrinsic value of stock.

jeff jeffy answered 2 years ago

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