Reading through Aswath Damodaran's textbook on Valuation. I'm a bit puzzled and if someone can offer some clarification that would be appreciated.
"To illustrate, assume that you have an asset in which you invested $100 million and that you expect to generate $12 million in after-tax cash flows in perpetuity. Assume further that the cost of capital on this investment is 10 percent. With a total cash flow model, the value of this asset can be estimated as follows: Value of asset = $12 million/.1 = $120 million"
Damodaran, Aswath. Investment Valuation . Wiley. Kindle Edition.
Why is the value $120M? Why is CF / cost of capital = value ?
Submitted November 08, 2020 at 06:19PM by ggm8ugr8 https://ift.tt/32p4kzX
