Which statement is true regarding DCF as an intrinsic valuation method?

The correct statement regarding DCF as an intrinsic valuation method is that it relies on estimated future cash flows. The discounted cash flow analysis is fundamentally based on forecasting the cash flows that a business is expected to generate in the future. These cash flows are then discounted back to their present value using an appropriate discount rate, typically reflecting the cost of capital or required rate of return. This process allows investors to estimate the value of an investment based on its potential future performance, rather than relying solely on current market conditions.

Using estimated cash flows is crucial because it provides a more nuanced understanding of a company's intrinsic value, allowing for an evaluation that takes into consideration future growth, profitability, and operational efficiency. Thus, the reliance on these future projections is a core aspect of the DCF valuation method, making this statement accurate.

Other statements provided, while they may have elements of truth, do not represent the fundamental characteristics of DCF analysis. For instance, DCF can be impacted by market movements over time as these affect a company's performance and the assumptions made regarding future cash flows. Likewise, while it is a widely used method, it is not always the first method employed in valuation; analysts might choose other methods based on the context or available data. Additionally, the