Applying DCF Model on Corporate Valuation: Influence of Leverage on Value - A Case Study of Netflix, Inc.
- DOI
- 10.2991/aebmr.k.220603.177How to use a DOI?
- Keywords
- Valuation; FCF; D/E ratio; Leverage; Netflix
- Abstract
Business valuation is indispensable to investment, with various ways to be used in their preferable scenarios respectively. Under the latest circumstances, great fluctuations have been seen in the majority of industries, which has brought up the complication of computing one’s estimated value. In regard to Discounted Cash Flow (DCF) model, it is mostly used when a company’s profits are expected to be unstable. Moreover, the level of liabilities is inevitable when it comes to valuation. Therefore, the paper takes a well-known and low-levered company yet with an indeterminate prospect, Netflix, as the sample of DCF valuation. Then, in comparison to its adjusted model and market capitalization value, the extent of the DCF model’s practicality and effects of leverage on a low-levered company shall be seen. To sum up, each variable used in calculation can make big difference to the result, which means this valuation method is rather sensitive to not only revenue sand costs, but also especially target D/E ratio and discounted rate(WACC). More importantly, corporate valuation can demonstrate the effects of changes in fiscal structure. As a result, in this case, an increase in the level of leverage can raise the enterprise value of a low-levered company if organized well.
- Copyright
- © 2022 The Authors. Published by Atlantis Press International B.V.
- Open Access
- This is an open access article distributed under the CC BY-NC 4.0 license.
Cite this article
TY - CONF AU - Zhiyu Cui PY - 2022 DA - 2022/07/01 TI - Applying DCF Model on Corporate Valuation: Influence of Leverage on Value - A Case Study of Netflix, Inc. BT - Proceedings of the 2022 2nd International Conference on Enterprise Management and Economic Development (ICEMED 2022) PB - Atlantis Press SP - 1095 EP - 1103 SN - 2352-5428 UR - https://doi.org/10.2991/aebmr.k.220603.177 DO - 10.2991/aebmr.k.220603.177 ID - Cui2022 ER -