Free Cash Flow as Value Criterion Message Board

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Strategies & Market Trends : Free Cash Flow as Value Criterion

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To: jbe who wrote (188)	11/10/1997 7:32:00 PM
From: Reginald Middleton	Read Replies (4) of 253

<<Okay, with that being said, what is a fair price for Compaq shares.> You tell me!! (As a Compaq owner, I can only hope that the fair price is higher than today's price.)> I asked the question to prove a point. You cannot ascertain a fair price of a company by simply looking at free cash flow. You have to project cash flows out to a future date and discount them back to the present using an appropriate discount rate (usually the WACC - weighted average cost of capital). Earlier you were attempting to differentiate between FCF and "my" methods, when in actuality pure FCF tells you nothing outside of how much money is in the company's checking accounts. rcmfinancial.com

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