# 1.4 DCF Implementation

### Key points

Each asset in the EDHEC

*infra*universe is valued directly, using the same methodology, on each index computation date.A DCF approach requires estimating future payouts, interest rate curves and a risk premia.

Following the IFRS 13 guidance and modern asset pricing principles, the value of each asset in the EDHEC*infra* universe on each index calculation date is computed using the *income* or discounted cash flow (DCF) approach.

This involves the following steps:

Arrive at a cash flow forecast at the valuation time i.e. the gross cash flows that are expected to accrue to the owners of the asset (before any management or other fee where relevant) - see Cash Flow Forecasting Methodology

Determine the relevant term structure of interest rates that has the an equivalent duration (i.e. horizon) than the investment.

Estimate the market price of risk for the relevant investment at the time of valuation.

for equity investments, this is the equity risk premia that is relevant to each infrastructure company.

for debt investments, this is the credit spread that applies to the relevant infrastructure debt instrument.

Finally, an asset price is computed.