Correcting for Selection Bias in Reconciling the DCF and Market Methods—There Is No Substitute for Good Professional Judgment

Jay B. Abrams

doi:10.5791/BVR-D-13-00012.1

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Article Contents

Abstract
Introduction
Valuation of the Company
Reconciliation of FMV
Summary and Conclusion

Editorial Type:

Article Category: Research Article

Online Publication Date: 01 Jun 2014

Correcting for Selection Bias in Reconciling the DCF and Market Methods—There Is No Substitute for Good Professional Judgment

ASA, CPA, MBA

Page Range: 27 – 45

DOI: 10.5791/BVR-D-13-00012.1

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Abstract

What should an appraiser do when the value indication from the market methods are double or triple that of the Discounted Cash Flow (DCF)? In this article, the author presents a method to reverse engineer the implied growth rates of the Guideline Companies and come to a rational, defensible weighting of methods. In the author's first application of this method, he weighted the DCF 90%, splitting the remaining 10% between two market methods.