Valuing a Privately Held Firm: The Discounted Cash Flow Method


Determining the value of a business is critical to many managerial and ownership decisions. One situation that calls for business valuation is small business succession planning, using franchising as a business model to position for future sales. In this case, the small, prepared food firm ABC Company needs financing to expand their manufacturing capacity to meet their franchise needs in the United States, but there are many circumstances where privately held businesses need a valuation. Based on a real business situation, this case invites students to represent the firm, performing a valuation using discounted cash flow analysis to serve ABC’s loan application process.

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