DISCOUNTED CASH FLOW ANALYSIS: A COMPARATIVE STUDY BETWEEN HISTORICAL DATA AND INFLATION PROJECTION

Abstract

Discounted cash flow (DCF) have predetermined structure and uses projections and taxes to support in evaluation for business decisions. Although the method is indicated by experts, the literature indicates that company valuation is considered subjective, because it is estimate. The study aims to analyze if present value of projected cash flow, applied from 2004 to 2010 through historical data and data adjusted by IPCA (Índice Nacional de Preços ao Consumidor Amplo or National Index of Consumer Prices), was confirmed with companies results in 2010. The projections were made considering three moments: a) projection of discounted cash flow, as literature area suggests and proceeds to conduct companies evaluation, from the year 2004, b) projection based on inflation, in this case the correction was added to each year, according to IPCA, and c) calculation of discounted cash flows using reports from 2004 to 2010. The study presents a descriptive, and develops from the content analysis with qualitative approach. It was observed that projections carried out over 7 years based in scenarios a and b present variation when compared with the scenario c. The study revealed that although the DCF proves viable to use (operation), the results of the projection when compared to the values obtained by the companies over the years are not confirmed in terms of compatibility. Moreover, it was observed that monetary adjustment by IPCA does not reduced such compatibility variation.