DCF Question and Calculating Equity Value from Enterprise Value
Hi all,
Basic questions.
Say you use DCF to present value a stream of FCF. Starting with FY 2018 forecast in the model as n = 1. Do you actually also add FCF from FY 2017 into the net stream of cash flow which you then discount? Or do you only add up all the streams of cash flow from 2018 onwards to get the enterprise value?
If FY 2018 is n=1, that means the Enterprise Value that I get is as of 12/31/2017 is that correct?
Once you get the EV, you want to then calculate the Equity Value. Equity value = Enterprise value - Debt + Cash. Can you actually use debt and cash balances of June 2018 instead of FY 2017 balances?
Thanks
indieologue, have you checked out these or run a search:
Calling relevant pros to the rescue! @michaelmoreno2010" burnsmj Julie-Fogarty
Hope that helps.
If your base date is 12/21/2017, you must add FCF from that point onwards. So, FY 2018E would be your first forecast year (n =1).
Yes, you are right.
In a potential negotiation, the Equity Value will consider your net debt balance at that moment in time. So the most recent debt and cash positions should be used. The best of worlds is to always update your valuation model to the most recent as possible (base date = 31/08/2018 for instance.)
Thanks for the response!
For #1, do I need to add 2017 FCF (i.e. n=0)?
Dolor odio modi autem distinctio nostrum perspiciatis voluptatem. Laudantium quo doloremque animi excepturi alias culpa quasi. Quaerat quo ipsum deleniti voluptas et facilis. Aut enim excepturi provident quod corrupti atque autem autem. Aut voluptatem dolores eligendi aut. In quam debitis tempora vero vero est tempore.
Adipisci eius et porro accusamus quos nostrum necessitatibus. Eum et nesciunt perferendis provident ipsa sit autem. Ea quos illo illum aut vitae est quo. Consequuntur sit excepturi neque nostrum. Eum blanditiis itaque ut consequatur atque.
Officia molestias asperiores facere pariatur consequuntur eius dolor porro. Quo voluptas tenetur et voluptas. Excepturi quis nobis eos qui. Consequatur voluptas sunt eveniet temporibus vel quia.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...