The discount rate is calculated based on the Required Rate of Return after taking into account the riskiness and timing of the future cash flows. An economic-based valuation methodology in which the sum of the present value of a company's future free cash flows is equal to the fair market value of a business. This method takes into account the risk factors associated with achieving the future cash flows when calculating present value. DCF analysis is one of the most commonly accepted valuation methodologies. Discretionary Items Generally refers to items paid to owners of a business or related entities, which can vary widely.
Examples can include bonuses, royalty payments, and compensation.
Double Taxation Taxation of profits at both the corporate level and the stockholder level. The corporation is taxed on its income and stockholders are taxed on dividends. The review by the acquirer of a target company's internal books and operations. Transactions are often made contingent upon the resolution of the due diligence process.