Discounted Cash Flow Model

Description
A DCF model is a specific type of financial modeling tool used to value a business. DCF stands for Discounted Cash Flow, so a DCF model is simply a forecast of a company’s free cash flow discounted back to today’s value, which is called the Net Present Value (NPV). This DCF model training guide will teach you the basics, step by step.
Even though the concept is simple, there is quite a bit of technical background knowledge required for each of the components mentioned above, so let’s break each of them down in further detail. The basic building block of a DCF model is the 3 statement financial model, which links the financial statements together. This DCF model training guide will take you through the steps you need to know to build one yourself.
This is a huge topic, and there is an art behind forecasting the performance of a business. In simple terms, the job of a financial analyst is to make the most informed prediction possible about how each of the drivers of a business will impact its results in the future. See our guide to assumptions and forecasting to learn more.
Typically, a forecast for a DCF model will go out for approximately five years, except for resource or long-life industries such as mining, oil and gas, and infrastructure, where engineering reports can be used to build a long-term “life of resource” forecast. For an example of this, please see our mining financial modeling course.