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"Different valuation methods, if properly applied, will generate estimates of firm values that are practically identical."...

"Different valuation methods, if properly applied, will generate estimates of firm values that are practically identical."

is this statement true or wrong and why is that ?

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Answer #1

Different valuation methods will give different values of the firm. For example the discounted cash flow methods values the firm based on the discounted value of the free cash flows of the business which occur at a future date. This method is based on the future free cash flows. The other popular method of valuation is the dividend discount model. By this model the firm is valued based on the dividends paid out by it. So if the firm does not give any dividend this method will not be useful and in this case the values will differ.

Also the free cash flows will differ from the dividends paid and yet again the valuation will differ.

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