Hi,
I'm trying to set up a simple DCF in Exel but get constantly a REF-error in my calculations for fully diluted shares (although I've allowed iterative calculations). In fact, I just tried to replicate an example from a textbook. Can someone help me out and spot the mistake?
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D28 is dependent on the results from F17 but to get the result in F17 you need a result for D28, it becomes a circular argument that cant be solved.
But this is pretty muchcopied from their approach. How would I have to link it instead?
Someone else with experience of modelling this would be better placed to answer, I'm just an excel jockey. Also none of the above should lead to a #REF! result, this can only happen if you've deleted a cell or cell/range name.
Use the current share price, not the implied share price, to calculate the ITM options.
hominem's comment should fix it.
For cases where a model is supposed to use circular references (interest expense on debt, financing fees for debt raise, etc) you can build in a circ switch. Designate any cell as your "switch". The switch will either have value 0 or value 1.
In the portion of the model that is circular, write the following formula: =if(A1,desired calculation,0) where A1 is your switch cell. Because A1 is boolean, you can just say =if(A1, ...), you don't need to specify =if(A1=1, ...). To make things easier, you can assign name "circ" to cell A1 using the name manager in the formula tab in excel. Then your formula is simply =if(circ,desired calc,0).
While building the model, you can keep switch on 1 (for more complex models I would suggest keeping switch at 0 for ease of auditing). To fix a #REF error from circularity, just flip switch from 1 to 0 and back to 1. Happy modeling.
No, they employed the implied share price.
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