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Description of  Advanced Discounted Cash Flow (DCF) Valuation Using R

This is a book by a DCF practitioner for DCF practitioners. It is like no other. Plus, it comes packed with thousands of lines of complimentary R code. DCF valuation is long overdue for much needed changes. This book clearly presents why these changes are needed as well as the tools necessary to implement them. Constant WACC (value-additivity non-compliant) DCF models are old school. Corporate finance texts, by and large, tend to hurt more than they help in this area. The circular and noncircular DCF techniques housed within these 800+ pages offer numerous advantages over the plethora of current DCF models and approaches that make little to no sense. It is time for a page turn in the field of finance. In this regard, the accounting equation has a very simple but powerful story to tell, and it beckons. Accounting Equation This is my story (circa 1494). Asset = Liabilities + Equity My name is Brian Lee. I am passionate about the field of finance, and I crave continual learning. Within the past 5 years, I personally attained my CFA (age 58) and CMA (age 62) professional certifications. At 63, I complete this book. Discounted cash flow (DCF) roots run deep within my soul, and valuation motivates the hell out of me. The time is now to pass the baton relative to a wealth of experience and knowledge I harbor in this vast arena. I constantly question and insist on knowing the why behind everything. Unfortunately, there are many unanswered why questions in the field of finance - especially DCF valuation. Why is the weighted average cost of capital (WACC) taught in corporate finance with only 2 terms instead of the requisite 3 terms? Why are the weights in the WACC equation often incorrectly taught as target market weights or alternatively as market weights? Why is the IRR metric taught incorrectly in most corporate finance texts? If analyzed correctly, there is never disagreement between the IRR and NPV metrics and it has nothing to do with modified internal rate of return (MIRR). There is a major misunderstanding of what IRR fundamentally means. NPV profiles are useless tools, yet their benefits are taught in corporate finance classes. Why? Note: As IRR is a topic unto itself, it is only referenced briefly in the text. Why does practically no one calculate Economic Profit (EP) correctly? Why do utilities incorrectly discount revenue requirements using the WACC discount rate (PVRR)? Why do firms and the U.S. Government insist on using constant discount rates in their DCF valuations? Why do practitioners not use required circular DCF calculations? Why do DCF practitioners steadfastly honor the accounting equation and completely disrespect the value-additivity rule? This book addresses not only the how but also the why behind DCF valuation. Plugging numbers into formulas without complete understanding is a recipe for disaster - especially when substantial dollars are at stake. All 40+ DCF valuation models in this text are value-additivity compliant. That is, they are all unified in their results regardless of selection of the DCF model selected. Approximately one month prior to this books targeted publication date, a major realization transpired in its development that dramatically and positively altered its content. Publication was delayed 3 months as a result. By pure happenstance, I discovered circular DCF valuation solutions are achievable in a noncircular manner without use of the APV model (an approximate 50 year-old valuation model that remains heavily debated to this day based on the non-unified manner in which tax shields are valued). Both circular and noncircular approaches are presented in the text that are in full agreement with one another. Unification of DCF valuation results is a major theme of the text. Brian K. Lee, MBA, PRM, CMA, CFA