Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Ascend Communications (ASND) -- Ignore unavailable to you. Want to Upgrade?

To: Immi who wrote (48814)	6/17/1998 12:57:00 AM
From: Darren	Respond to of 61433

DCF is Discounted Cash Flow, a common mechanism used in Leveraged Buyouts. The fact is, DCF is probably not the best tool because ASND is a high tech company and high-tech LBO is an oxymoron...but it is an adequate measure of the company's naked worth...I know, it must be more expensive if they have clothes on...blah blah blah... P.S. I don't personally have 3+ years in investment banking, I just built the LAN/WAN and learned a lot while I was there, including how to fill in a "paint by numbers" spreadsheet.

To: Immi who wrote (48814)	6/17/1998 1:54:00 AM
From: Chuzzlewit	Read Replies (1) \| Respond to of 61433

Immi, I use DCF on a daily basis, so I can speak with some authority. DCF stands for discounted cash flow. Basically, you generate a long term cash flow projection and then discount those cash flows using a risk-adjusted discount rate. The risk is generally defined as the standard deviation of those cash flows. The alternative is to calculated the firm's average weighted cost of capital (WACC) and proceed from there. The problem with the approach is that projections become very murky when you are dealing with a rapidly evolving industry. Who knows what products will be out there ten years hence, and who knows what the Asian economic situation will be then. In other words, this is far from a simple mathematical operation, and depends on a great number of other operations and assumptions. There is an excellent text on DCF applied to corporate valuations entitled "Valuation" by Copeland, Koller and Murrin. This is a 500+ page text. Another excellent source of information from the people who perfected the technique: Grant and Ireson "Engineering Economy" originally published in 1930 but in its eight or ninth edition now. Hope this helps at least a little bit. TTFN, CTC