All modules
Valuation
The Three Approaches to Valuation
A practical breakdown of the Income, Market and Cost approaches with guidance on when to apply each.
Updated 17 Aug 2026
The Three Approaches
1. Income Approach
Converts expected future economic benefits into present value. The most common method is the Discounted Cash Flow (DCF).
Enterprise Value = Σ (FCFF_t / (1 + WACC)^t) + Terminal Value
2. Market Approach
Values the business by reference to comparable companies (CCM) or comparable transactions (CTM).
3. Cost / Asset Approach
Based on the net asset value – assets less liabilities, adjusted to fair value.
| Approach | Best For |
|---|---|
| Income | Cash-generating going concerns |
| Market | Companies with good comparables |
| Cost | Asset-heavy / holding companies |
#DCF#market approach#methods