Cash Flows Valuation Using Capital Cash Flow Method Comparing it with Free Cash Flow Method and Adjusted Present Value Method in Companies Listed on Tehran Stock Exchange

One firm valuation method is to use discounted cash flow. In this paper the valuation method of Capital Cash Flow discounted at the Weighted Average Cost of Capital (WACC) before tax is represented and, as a proof to its efficiency in Iran market, it is compared with two common methods, i.e. Free Cash Flow discounted at the weighted average cost of capital after tax and the adjusted present value. For the same purpose, 54 firms from among those companies listed on Tehran Stock Exchange were selected as sample and their financial information for three-year financial period from 2004 to 2006 were collected and analyzed by paired Student’s t-test. Research results showed that using an appropriate discount rate will make the value calculated by Capital Cash Flow method become twice as much when using two methods mentioned above.