A number of financial experts have suggested that the true or intrinsic financial value of the common shares of a company can be determined using discounted cash flow (DCF) analysis. That is, the financial value of a common share is equal to the total value of all the dividends expected to be paid per share into the indefinite future, discounted to the present value. (Present value is based on the fact that a dollar in your hands today is worth more than a dollar that will be paid to you 10 years from now, because of the effects of monetary inflation). 
 
The intrinsic value calculated using discounted cash flow (DCF) analysis requires an estimate of two variables:

1)    The annual dividend that will be paid per common share, each year into the indefinite future, and

2)    The annual discount rate (the inflation rate) that should be applied to the dividend each year into the indefinite future.

Unfortunately, the intrinsic value calculated using DCF analysis is very sensitive to small changes in either of these two variables. Therefore, the analysis can yield a wide range in the intrinsic value, even if the estimated values of both variables fall within a reasonable range. As a consequence, the intrinsic values calculated by DCF analysis, are not particularly useful for investors. 

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