Determination of free cash flow in discount model: Free cash flow discount model calculates the discount rate of future cash income, so depreciation is also a production cost. Net working capital is not equal to total current assets minus current liabilities, so you can calculate net assets.

Valuation is from the perspective of investors, so we should compare the opportunity cost. For a stock, as long as the present value of asset appreciation is higher than the current market price of the stock, this investment is valuable. The discounted cash flow valuation method relates the value of assets to the present value of expected future cash flows.

The most perfect method in theory

Cash flow discount method, also known as cash flow discount method, is to predict the free cash flow in the next few years, and calculate the present value and final value of these cash flows with an appropriate discount rate (usually weighted average cost of capital), so as to predict the reasonable company value and equity value. The discounted cash flow method is the most perfect valuation method in theory to analyze the overall situation of a company, considering both the risk of funds and the time value of funds.