Quote Originally Posted by winner69 View Post
They are the same of course

But in this discussion the $1m cash flow is a forecast / projection / calculation ... and the problem / question is what would pay to get a forecasted $1m from Grandma's Trotters and how much for the Coke $1m

Some analysts don't use WACC at all ...... they do cashflows under many scenarios and by applying probabilities against each come up with an expected value of the cash flows and use those as the basis of their valuations

Note the words applying probabilities and expected ... see it all really is a big guess (OK best guess / judgement) ... just like the equity premium used in WACC calculations is and just like what Warren might use

So back to Grandma and Coke ... what is the likliehood of those $1m cash flows actually be achieved
Nicely put. Considering how drastically just 1% each side of your discount rate can alter valuations one might wonder if there is any point at all!

As usual Buffett and Mungers wisdom seems most rational:

Only commit funds if a large margin of safety exists to your subjective valuation. And its better to be approximately right than precisely wrong.

Cheers

Sauce