Selecting the Income Flow The appraiser believes that in this case the best measure of income for valuation purposes would be the Net Cash Flow to Equity (“NCFE”) model for the Company because • The interest being valued is an equity interest. • The Company has a history of minimal debt financing. • The owner has indicated the continuation of an equity financed business model (i.e., the Company is to be funded through operations. • Given the financial strength of the Company, the appraiser believes it is reasonable to assume that the Company can continue to finance the business through operations. NCFE represents the cash available to equity owners of the subject company after considering the funding of capital expenditures, levels of working capital needed for operations, and the impact of other items affecting the capital structure (e.g., long term debt and preferred stock) of the business. NCFE is defined as the following
