8. Limitatios of residual valuation methodology and financial modelling

Question 1

Describe some limitations of the residual valuation methodoloy and financial modeling

Answer 1

• Strong importance for accuratie information and inputs
• A residual valuation does not consider timing of cash flows
• Very sensitive to minor adjustments
• Implicit assumptions hidden and not explicit (unlike a DCF)
• Always cross-check with a comparable site valuation if possible