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What is the primary purpose of a discounted cash flow valuation?

  1. A Estimating intrinsic value from projected future cash flows discounted at the required return
  2. B Comparing multiples with peers
  3. C Determining the book value
  4. D Calculating tax liability
Answer

Estimating intrinsic value from projected future cash flows discounted at the required return

Terminal value often dominates the result, which is why its growth rate and exit multiple assumptions deserve close scrutiny.

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