AN AUSTRIAN CRITIQUE AND ALTERNATIVE TO DISCOUNTED CASH FLOW ANALYSIS

Among scholars, Discounted Cash Flow is considered one of the most precise methods to preview the “fair” value of an asset. However, as the Austrian School explains, social phenomena are complex and cannot be modeled. Social facts involve uncountable variables and a radical, permanent uncertainty. So, this work presents a critique of the Discounted Cash Flow Perspective and introduces guidelines for the development of an Austrian entrepreneurial-based alternative. Entrepreneurs are individuals who bear uncertainty, while seeking profits and molding the future, aiming to satisfy consumer needs. It is through entrepreneurship that firms sustain their activities over time, challenging turbulences and creating/exploiting opportunities. Then, more than modeling prices of firms, investors should analyze the quality of the entrepreneurship of the firms they intend to invest in, rewarding and trusting those they see as most profitable in the future.