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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
- Financial Modeling Tutorial guides user via step by step approach on how to build financial models with DCF valuation.12 remove_red_eye$125.00by Fin-Wiser Advisory
Business Valuation Excel Model with Economic Value AddedBusiness and investment valuation model with economic value added (EVA) calculations.370 remove_red_eye
Mergers and Acquisitions (M&A) Financial Excel ModelA complete financial model for mergers and acquisitions (M&A). Includes DCF, accretion/dilution, sensitivity, much more.202 remove_red_eye
Single Sheet DCF (Discounted Cash Flow) Excel TemplateSingle sheet DCF Template helps the user understand the dynamics of Discounted Cash Flow (DCF) valuationNew!
Kiosk - 3 Year Startup Financial Excel ModelRevenue and cost logic specific to running multiple kiosks.27 remove_red_eye$45.00by Jason Varner
Financial Projections Excel Model Driven by Account Executive Performance/New HiresDrive revenue projections based on how you think your account executives will perform over time. Extensive assumptions.71 remove_red_eye$55.00by Jason Varner
Discounted Cash Flow (DCF) Model Template + InstructionsLearn how to build a simple DCF Model aligned with Investment Banking best practices.205 remove_red_eye
DCF Valuation Model TemplateThis template provides you with a foundation to build your own discounted cash flow model with different assumptions.598 remove_red_eye
Synergy Valuation Premium DCF Excel ModelA Premium Discounted Cash Flow DCF Model including synergy valuation765 remove_red_eye
Discounted Cash Flow (DCF) ModelA step by step Discounted Cash Flow Analysis Tutorial (DCF model)18,554 remove_red_eye
Investment Banking Spark Financial ModelProfessional investment-banking financial model, made easy by step by step instructions and video tutorial138 remove_red_eye$65.00by David Liu
Dividend Discount Model: Gordon Growth, FCFF & FCFEThis video gives an explanation of the Dividend Discount Model and income based valuation approaches.20 remove_red_eye
Calculating Discounted Cash Flow in ExcelThis video takes you through a DCF Excel model to show you how to calculate Discounted Cash Flow.279 remove_red_eye
Discounted Cash Flow (DCF) Model Excel TemplateThis is a valuation tool known as the DCF model. This is an Excel template.20 remove_red_eye
Discount Cash Flow Template in ExcelThis is a discounted cash flow (DCF) template with income statement, balance sheet, FCF calculation & FV calculation.61 remove_red_eyefreeby Andrew Han
Discounted Cash Flow (DCF) Excel ModelThis DCF Excel Model provides a rough guide to which discounted cash flow model may be best suited to your firm.1,022 remove_red_eye
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