Which is NOT a step in the DCF process?

In the Discounted Cash Flow (DCF) process, the primary focus lies on estimating the value of an investment based on its expected future cash flows. The essential steps involve projecting these cash flows, discounting them back to present value, and then summing these values to determine the total valuation.

The first step is to project future cash flows, which requires estimating the revenue and expenses that the business may generate over a certain period. The next important step is to discount these cash flows to their present values. This involves applying a discount rate, which takes into account the time value of money, reflecting the idea that a dollar today is worth more than a dollar in the future. The final crucial step of this process is finding the present value of all cash flows beyond the initial projection period, often referred to as the terminal value.

Calculating the future share price does not fall within the standard DCF framework. While investors may indeed be interested in the share price as part of their analysis, determining it isn’t a direct step in the DCF calculation itself. Instead, DCF focuses solely on cash flow analysis and valuation through present value calculations rather than directly estimating share prices. Thus, the choice related to calculating the future share price accurately reflects a step that