Discounted Cash Flow Valuation for Oil and Gas Pipelines

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By Eric C. Henson, Vice President, Compass Lexecon

Discounted cash flow (DCF) analysis is a standard method for valuing a wide range of assets such as fixed assets, including oil and gas pipelines, as well as stocks, bonds and real estate investments/properties. Typically, assets in any financial analysis produce a series of cash flows. DCF analysis values this series of cash flows by bringing them to the present. That is, DCF analysis finds the present value of expected future cash flows that will be derived from the assets in question. In simple terms, DCF analysis determines the value of assets today based on…

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