The Discounted Future Proceeds Method
What is the DFPM?
The DFPM connects DCF business enterprise value directly to equity allocation across each tranche of a multi-class capital structure. It is forward-looking, accounts for time to exit, future capital needs, and applies a risk-adjusted discount rate to each layer, from approximately 12% for senior debt through 23.5% or more for common equity upside
01
Return Book
A dedicated guide to understanding investment returns across the full risk spectrum, from senior secured lending through common equity and options.
02
Preferred vs. Common Equity
Learn how preferred and common stockholders differ in rights, liquidation priority, and how each class participates in a distribution waterfall.
03
Key Terms
Master the essential vocabulary of multi-class capital structures, including participating vs. non-participating preferred, dividend mechanics, and return hurdles.
04
Example Waterfalls
Walk through step-by-step distribution scenarios showing exactly how proceeds flow across each tranche from senior debt to common equity.
05
Multi-Layer Capital Stacks
Understand how senior debt, mezzanine, preferred equity, and common equity stack together and interact when proceeds are distributed.
06
Valuation Methodologies
Explore the four primary equity allocation methods, CVM, OPM, SBM, and DFPM, and when each is appropriate under AICPA guidance.
Created by Cary Potter, Managing Partner of Deal Valuation, LLC. Cary brings 30 years of valuation experience across KPMG, Oracle Capital, and American Appraisal, specializing in multi-class equity structures and 409A valuations for PE- and VC-backed companies.
Cary Potter, Founder and Chief Executive Officer