5.2.1
 Income method (capitalization of earnings)
The most widelyused method to compute the value of
a business looks at the present value of anticipated
future income or cash flow generated by the business.
In effect, the valuator capitalizes the company's current
earnings. Like other methods for valuing financial instruments,
this method relies on the discounted cash flow (DCF)
model. (More 5.2.1>>)
5.2.2  Basic DCF formulas
To understand the income method, you should have a
firm grasp of the basic DCF formulas  including the
general DCF formula, the formula assuming zero growth,
and the formula assuming constant growth. (More
5.2.2>>)
5.2.3  Applying DCF formulas
To apply the DCF method, the valuator must estimate
cash flows/earnings, by adjusting book earnings and
making projections. Then the valuator must determine
a discount (or capitalization) rate, using such methods
as CAPM or weighted cost of capital. (More
5.2.3>>)
5.2.4  Excess earnings method
The excess earnings method, sometimes known as the
"formula method", is used by courts to "simplify"
the valuation of closelyheld businesses. Hardly a simplification,
it is a hybrid that combines cost and income approaches.
Earnings are separated into those derived from tangible
assets and intangible assets (name, reputation, quality
of personnel). (More 5.2.4>>)
