Originally published: 19/09/2016 14:53
Last version published: 05/04/2018 12:30
Publication number: ELQ-10661-11
View all versions & Certificate
Last version published: 05/04/2018 12:30
Publication number: ELQ-10661-11
View all versions & Certificate
Discounted Cash Flow (DCF) Model
A step by step Discounted Cash Flow Analysis Tutorial (DCF model)
by Patrik JohanssonStrategy & Business Development, Change Management, Supply Chain, Board Member and extensive M&A experience.Follow 12
Further information
This DCF model can be used by CFOs, Students, Teachers, Business controllers, M&A analysts, Private Equity analysts etc. The model is easy to use, has a hiqh flexibility and gets the job done.
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- Nice work!Nice work!
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Discussion feed for Discounted Cash Flow (DCF) Model
The user community and author are here to help. Go ahead!
- how would you rate this model to value private companies?
- Thanks for your question. I only use it to value private companies... Stock-listed companies tend to have a market value already (right or wrong). Good luck!
- Thanks! I was looking to value a private saas start-up companie. Do you have any idea of some modification I should bring to the model. Or maybe there's another model better to value this type of companies.
- You can perhaps check these pages on Eloquens.com -> There are quite a few SaaS Valuation Models in there. If you don't find what you're looking for, you're welcome to Private Message the Authors - perhaps they can help! Good luck!
https://www.eloquens.com/category/startups/software-as-a-service-saas/78
https://www.eloquens.com/category/startups/financial-models/87
https://www.eloquens.com/category/startups/startup-valuation-methods/711
- Very useful tool by Eloquens and practical to use too. Great work and continue to keep abreast to latest changes. Thank you for the free tools as always.
- When you calculate implied exit multiple, why do you multiple the terminal value with (1+WACC)^period? shouldn't the terminal value in cell D63 already be the the value at the terminal year?
- Good question. It is calculated the way I was taught. I guess both methods will work. Good luck.
- Agree. I have the same question as David. Can I know why?
- is using size premium a market standard? I never learnt to account for the size premium when calculating cost of equity.
- Different schools are applied also here. It does not make sense to have a very low WACC on a start-up or a very small company, then the value will be too high. There are several ways to adjust WACC such as; size premium, country premium, company-specific premium etc.
- shouldn't the discount period 1 instead of 0.5 buz you are discounting by 1 year instead of discounting semi-annually?
- Mid-year method is applied. You do not receive all cash at the end of the period. Different schools, pick the method you prefer best.
- what does WACC stand for
- WACC stands for Weighted Average Cost of Capital, it is a company's required return on an investment, mixture of both required return on and equity and debt. Read more here: http://www.business-valuation.net/definition/wacc/
- Shouldn't the Increase/Decrease in NWC formula be reversed? The model is subtracting current year from previous year.
- Don, thanks for your message. What you want to do is to see the cash flow effect from an increase/decrease in working capital. If you for example have 182 (2017A) and compare it to 180 (2016A), you have an increase in working capital of =2. This gives a negative cash flow effect of 2 decreasing the Unlevered Free Cash Flow for that year. So, the model is correctly calculating as it is right now. Maybe the line 36 should be named something else. "Cash flow effect of increase/decrease in NWC". Your choice :).
Good luck!
- In the tutorial which company's data has been used? I'd like to know so I can relate to the correct numbers while looking at other company's data.
- Thanks for your question. Sorry to disappoint you but a lot of the numbers in the model are made up to achieve a "normal" business for educational purpose. I am happy to answer other questions you might have in the modeling. Good luck.
- Hi, where can I find the accompanying step by step methodology for the sheet?
- Hi Anish,
Sure! It's really easy.
1/ Download the DCF Model from this page
2/ Go to your Library Page on Eloquens
3/ Click on the Tool Title Link
4/ You will be on the /details page and from there you will be able to download the file + follow the step by step methodology written just below.
Hope this helps (feel free to give a rating/review if you have appreciated the model).
Good luck!
- I did not receive the online methodology document. Can only download the Excel file using the link sent over e-mail. Could you please help?
- Dear Rohit. On the page where you download the excel, there should be a tutorial you can follow. If you cannot find it there, the tutorial is also available here: https://www.business-valuation.net/methods/discounted-cash-flow-analysis/
Good luck!
- why to remove the model?Can u pls send it to my Email,tks!
- Dear Tao, I am not sure what you mean. The model is still published?
- Hi Tao,
If you want to have access to the model, simply click on the big blue button "Download for Free" on this page (see above). The Tool will then be added to your personal Eloquens library. Then, click on the title and you will be re-directed to a page from which you can download the Excel File! (Big Blue Button "Download").
Let us know if you face any additional issues in the process.
Best regards,
The Eloquens Support Team
- for CAGR in Forecast period:
why are you using the forecasted and the end of year period of actuals?- thanks for your questions. You are free to use any period for CAGR. The reson why its there, is for comparison reasons only, to see if your forecast makes sense or not. If you historically for example have had a growth of 5%, perhaps it doesnt make sense to have a 10% CAGR in the forecast or vice versa. Good luck!
