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MONDAY MULTIPLE

A discounted crab flow valuation

Using cash flows to value a business takes time, but this way is the most theoretically accurate

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This crab restaurant chain has the potential to give you a stream of cash stretching into the future. If you can figure out how much and how fast this stream of earnings will grow, you get a better sense of how much to pay for this business.

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IMAGINE a crab restaurant chain is up for sale. The salesman tells you that the chain earned roughly S$110 million last year and S$100 million the year before. After deducting all costs and taxes, the chain made S$14 million for its owners last year and S$10 million the year before.

So

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