Discounted Cash Flow (DCF) models
What is Discounted Cash Flow?
Discounted cash flow analysis is one of the most important methods to accurately estimate the value of an asset via applying the concept of the time value of money (TVM). Primitive forms of discounted cash flow analysis have been used since ancient times but have since undergone significant development. This was sparked by the Wall Street Crash of 1929 and the need to have a reliable method for the valuation of stocks. It was not until, Irving Fisher and John Burr William’s published their texts, The Theory of Interest (1930) and The Theory of Investment Value (1938) that the discounted cash flow analysis was formally documented.
A high-level overview of the process of conducting a discounted cash flow analysis firstly involves estimating the future incoming and outgoing cash flows. After this is completed, discounting these flows is required which is usually calculated by using the Weighted Average Cost of Capital (WACC). The completion of both these steps yields the net present value (NPV). Ultimately, the aim of a discounted cash flow analysis is to calculate the financial benefit undertaken from a potential investment and if it is worth pursuing considering the cost of investment.
The detailed outline of the Discounted Cash Flow process:
Step 1: Forecast the Expected Cash Flow: This would involve forecasting the expected cash flow based on the business’s income tax rate, net operating profit margin, incremental working capital requirement, company’s revenue growth rate and fixed investment requirement.
Step 2: Estimate the Discount Rate: The next step would involve estimating the WACC (Weighted Average Cost of Capital), which is the discount rate.
Step 3: Calculate the Value of the Corporation: This step would involve using the WACC to discount the expected cash flows to get the Cash Flow from Operations (CFO).
Furthermore, the WACC is used to calculate the residual value. This is added with short term assets to get the value of the corporation.
Step 4: Calculate Intrinsic Stock Value: This step involves subtracting the company’s liabilities such as debt to receive common equity. This value then should be divided by the amount of stock outstanding to receive the intrinsic stock value.
If you’d like to know more about Discounted Cash Flow Analysis, have a read of Investopedia's article
Where can I find Discounted Cash Flow DCF Excel Model Templates?
For companies considering to analyse it’s investments, the Eloquens catalogue provides a variety of Discounted Cash Flow DCF Excel Models and templates designed and built by professionals and professors where all you need to do is to input the required values. The Discounted Cash Flow DCF Model Template automatically calculates the rest for you. You can also build and self-publish your own model and template on Eloquens directly. Learn more
- A fully customizable excel model to match your needs, and use as a starting point or as a full DCF tool for valuation.1,280 remove_red_eye142freeby Firmex
movieImplied Risk Premium in a MarketCalculate the implied risk premium in a market151 remove_red_eye22
Valuation: Free Cash Flow to Firm (FCFF) vs Free Cash flow to Equity (FCFE)Valuation model that reconciles FCFF and FCFE766 remove_red_eye97
The Discounted Free Cash Flow (DCF) ModelA full discounted cash flow excel model for a complete business405 remove_red_eye54
movieProperty Valuations ModelingSimple Property Valuation Model showing the 3 primary methods for valuing property assets.406 remove_red_eye62$15.00by Lance Rubin
Discounted Cash Flow (DCF) Analysis with IRR and NPVSeveral spreadsheets that can be used for the analysis of a real estate investment from various perspectives1,761 remove_red_eye237
Abercrombie & Fitch Valuation ModelA full PDF of an Excel Valuation Model created for fundamental analysis of Abercrombie & Fitch ($ANF) in 2006267 remove_red_eye41freeby Lindsay Meyer
Free Cash Flow for the Firm (FCFF) Stable Growth ModelValue a stable firm on the basis of free cashflows to firm.331 remove_red_eye35
Discounted Cash Flow ModelThis model provides a rough guide to which discounted cash flow model may be best suited to your firm.376 remove_red_eye61
Discounted Cash Flow (DCF) ModelA step by step discounted cash flow analysis tutorial (DCF model)4,034 remove_red_eye723
Leveraged Buyout LBO Model - DCFA comprehensive LBO model in excel of business acquisition908 remove_red_eye138freeby Amit Tandon
Discounted Cash Flow (DCF) Model (Academic Quality)A simple DCF model serving as an academic exercise to understand how financial modeling works.725 remove_red_eye132freeby Joshua Wong
Activision Blizzard DCF (Discounted Cash Flow) ModelA simple DCF Model based on Operating and Working Capital Assumptions (example: Activision Blizzard)236 remove_red_eye40
Free Cash Flow to Equity (FCFE) Stable Growth ModelValue the equity in a stable firm on the basis of free cashflows to equity133 remove_red_eye20
Three-Stage Dividend Discount ModelValue the equity in a firm with three stages of growth695 remove_red_eye94
Three-Stage Free Cash Flow for the Firm (FCFF) Discount ModelValue the equity in a firm with three stages of growth193 remove_red_eye34
Three-Stage Free Cash Flow to Equity (FCFE) Discount ModelValue the equity in a firm with three stages of growth201 remove_red_eye34
Two-Stage Dividend Discount ModelA dividend discount model for firms with two stages of growth255 remove_red_eye39
Two-Stage Free Cash Flow to Equity (FCFE) Discount ModelValue the equity in a firm with two stages of growth254 remove_red_eye35
Two-Stage Free Cash Flow for the Firm (FCFF) Discount ModelValue a firm with two stages of growth on the basis of free cashflows to firm134 remove_red_eye18
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