What should the results of DCF analysis be checked for?

The results of Discounted Cash Flow (DCF) analysis should be checked for errors and reasonableness because this ensures that the projections, calculations, and assumptions used in the analysis are both accurate and logically consistent. DCF analysis relies heavily on estimates of future cash flows and the appropriate discount rate, and any mistakes in these calculations can lead to significantly incorrect valuations.

Verifying the reasonableness involves assessing whether the cash flow projections align with historical performance, market conditions, and industry standards. By ensuring that the figures produced by the DCF analysis are correct and sensible, appraisers can provide a more reliable valuation of the investment or property being assessed.

Other considerations, such as regulatory compliance, market competition, or using multiple valuation methods, while important in the broader context of valuation or investment analysis, do not directly address the technical integrity and logical soundness of the DCF results themselves. Therefore, confirming the accuracy and reasonableness of the results is crucial in maintaining the credibility of the analysis.