> Let's say you have a farm, which is expected to pay $1B to investors over the next 10 years and then cease operation
Expected by whom?
Who gives you the certanety that they'd pay 1B/yr ?
The CEO projections? That's just like marketing material
Let's say you come up with your own projections and indeed it points at a 1B/yr profit. At the end of the day you are still looking at the past/present and trying to predict the future thoughts and actions of people other than yourself.
You are making a prediction/bet that people other than yourself will buy some X billions dollar worth of the farm products and that the difference between revenues and cost of good sold is going to come out at 1B per year which is the profit which at the end of the 10 years it totals 10B
By the person doing the valuation. There's no certainty, it's an expected value of the assumed probability distribution, which is why each cash flow is discounted - because it's not certain.
Yes, valuation is about predicting future profits which depends on what people will buy etc. For example, I predict that people will continue to buy Coca-Cola in roughly the same volumes as they do today.
Expected by whom?
Who gives you the certanety that they'd pay 1B/yr ?
The CEO projections? That's just like marketing material
Let's say you come up with your own projections and indeed it points at a 1B/yr profit. At the end of the day you are still looking at the past/present and trying to predict the future thoughts and actions of people other than yourself.
You are making a prediction/bet that people other than yourself will buy some X billions dollar worth of the farm products and that the difference between revenues and cost of good sold is going to come out at 1B per year which is the profit which at the end of the 10 years it totals 10B