What is the first step to determine the present value of a company?

The process of determining the present value of a company is fundamentally rooted in evaluating its future cash flows. The correct first step involves discounting each unlevered free cash flow using the cost of capital. This approach reflects the time value of money, emphasizing that cash flows received in the future are worth less than the same cash flows received today.

By discounting future cash flows, you convert them into their present value, allowing stakeholders to make informed investment decisions. This is a crucial part of valuations, especially when using methods like discounted cash flow (DCF) analysis.

Other options, while relevant in the context of financial analysis and company valuation, do not directly contribute to calculating present value in the same foundational manner. For instance, calculating total revenue, determining market share, or estimating future sales growth rates are important for good forecasting and understanding a company's potential. However, they are not the immediate steps in calculating present value. The focus must initially be on cash flows and their respective discounting to gauge current value accurately.