How do you update and monitor your liquidation analysis and DCF over time?
If you are involved in a distressed situation, you need to perform a liquidation analysis and a discounted cash flow (DCF) analysis to assess the value and recovery prospects of the business. A liquidation analysis estimates the net proceeds from selling the assets and paying off the liabilities of the company in a hypothetical liquidation scenario. A DCF analysis projects the future cash flows of the company and discounts them to the present value using a weighted average cost of capital (WACC). Both analyses are important for creditors, investors, and stakeholders to evaluate their options and negotiate the best outcome. However, these analyses are not static and require constant updating and monitoring over time. Here are some tips on how to do that effectively.