DCF vs three statement model
Sorry in advance for the stupid question but I have to do a valuation on a public company. For the intrinsic portion I of course am running a DCF. For a DCF my understanding is that all I need is the P&Ls and then capex from CFS and change in NWC from BS. So is it fully necessary to do a three statement model? If so that’s fine but could anyone please explain why? Just for accuracy of those cash flow adjustments?
Also for this company for the cost of capital —> actually specifically for the cost of debt do I use the company’s yield or the cost of debt for all companies? I think the latter but wanted to confirm. And in general where do you pull this data from?
Thank you all in advance for your help
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You don't need to do a full 3-statement but it's good practice, because in any case for the DCF you need IS and CF statements so might as well do BS while you're at it.
Use the company's cost of debt. Can use (interest expense / net debt at beginning of period) as proxy, or check the financial reports, there's a section usually.
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