Page 73 - FINAL CFA I SLIDES JUNE 2019 DAY 12

LOS 49.m: Explain advantages and Session Unit 14:
disadvantages of each category of 49. Equity Valuation: Concepts and Basic Tools
valuation model., p.305

Advantages of discounted cash flow models:
• They are based on the fundamental concept of discounted present value and

are well grounded in finance theory.
tanties
• They are widely accepted in the analyst community.

Disadvantages of discounted cash flow models:

• Their inputs must be estimated.

• Value estimates are very sensitive to input values.