The business cycle of the economy directly affects the present value of a firm

The value of a firm goes up and down with the business cycle. When the economy is on the up, i.e. there is growth and then eventually a boom, the value of the firm goes up as well. This is because, in such a period, sales are high and so are profits. Also, the value of money is low and so, in real terms, the value of the firms goes up as well. Due to the high sentiments in the economy, the shares of the firm may go up as well further increasing its value.

On the other hand, during a downturn where there is a recession and then a possible slump, the profits of the firm go down hitting its present valuation. The demand is low throughout the economy. At the same time, the value of money is high so that the value of the firm is low. The shares of the firm will decrease in value which means its valuation will go down.