income and cash flows. If your business is built on low capital intensity, that is, it can scale up easily, it is the reinvestment that will show that advantage, remaining low for big increases in revenues. If a business is low risk, the discount rate that you use to bring the cash flows back to today will be lower (and the value higher). Figure 8.3 summarizes the effects. Figure 8.3 Connecting stories to valuation inputs. Simplistic though this framework may be, it is remarkably flexible in terms of being able to factor in story lines for companies across the life cycle and in different
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