The discounted cash flow (DCF) method is part of the income approach to valuation. The income approach values a company based on its ability to generate future income or cash flows, which are then discounted to their present value. The DCF method specifically forecasts future free cash flows and discounts them back to the present using an appropriate discount rate (such as WACC).

Key points:

• Market approach: Uses market-based multiples from comparable companies or transactions
• Income approach: Focuses on future earnings/cash flows (includes DCF method)
• Asset-based approach: Values company based on net asset values