Discounted Cash Flow Analysis of a Simplified Joint Stock Company from the Pharmaceutical Field

Abstract

This article presents the commercial value and the expected value of the assets from a simplified joint stock company (SAS, for its initials in Spanish) from the pharmaceutical field, that is, the hypothetical negotiation price over which some buyers and sellers, all reasonably informed about the negotiation and with the ability to commit in a transaction, would agree. Two options were used for the discounted cash flow analysis: (1) assess the business shareholder’s assets exclusively (equity valuation), based on the shareholder’s expected flow, discounted from the shareholder’s cost of capital; and (2) assess the entire firm (firm valuation), which includes both the assessment of the shareholder’s assets and the assessment of the creditor’s rights, based on the free cash flow expected from the company, discounted from the weighted average cost of capital. As a result of the procedures, activities and methodology used for the assessment of the SAS, a reasonable value is obtained, from the financial point of view, to be used as a reference pattern in possible negotiations.