Discounted Cash Flow Model The potential earning power of a company is generally a paramount factor for valuation of share but there may be occasions, especially in valuations for compensation, where other considerations become relatively more important. In the absence of any other special motive, an investor is principally interested in a company’s ability to continue earning profits. The Income Approach indicates the value of a business based on the value of the cash flows that a business is expected to generate in future. This approach is appropriate in most going concern situations as the worth of a business is generally a function of its ability to earn income/cash flow and to provide an appropriate return on investment. The Income approach includes a number of models/ techniques, such as Discounted Cash Flow, Maintainable Profits Basis, Dividend Discount Model, and others. DISCOUNTED CASH FLOW (DCF) Discounted Cash Flow model indicates the fair mar...