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Biotech / Medical : SANGUINE CORP. (SGNC)

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To: dwlima who wrote (2494)	7/3/1998 4:41:00 PM
From: wonk	Read Replies (1) of 5402

dwlima: it is incorrect to discount future earnings... earnings does NOT equal cash. this would be a grave mistake in my professional opinion to perform a valuation in this manner Discounted future earnings (DCE) and discounted cash flow (DCF) are two separate valuation techniques falling under discounted future returns (DFR); both valid. Professional experience helps one to choose which one is appropriate in a particular situation. The discounted future returns (DFR) approach to valuation is most often used in the context of mergers and acquisitions. However, as discussed in Chapter 2, it is the theorectically most correct approach to valuation and serves a wide variety of valuation purposes... Valuing a Business: The Analysis and Appraisal of Closely Held Companies. Shannon Pratt. Second Edition. Pg 68. Using DFE in this situation can simplify a complex problem. It is perfectly valid and, quite frankly, I am surprised you have never come across it. ww

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