Hi guys, I'm a second year student and I have a problem with my DCF model which was prepared for my paper work at university. The problem is the following: % of Implied EV from TV is 87%. As far as I know, this is an extremely high percentage. That is why, I would like to ask you for your help. I think, I did some dramatic mistakes which impact on the final result ( I got a very low cost of debt and equity). Please, make a review and comments with your suggestions.
08 May 2021
Hello Monkeys, This is my first post and being used to read your high quality answers I am sure you will be able to bring me your lights When we calculate the terminal value in a DCF we use: (the last cash flow of our explicit horizon*g)/(WACC-g). Then we have to discount this Terminal Value, and my question is: are we going to use the number of years of the explicit horizon or this number +1? For example, we have a 5 year DCF. Do we discount the terminal value by 5 or 5+1=6? Thank you for your answer
27 Mar 2021
Hi Monkeys, I'm currently interviewing for a finance job and was provided a random company and asked to "build out a projected income statement, balance sheet, and DCF analysis for the company". I've always practiced forecasting balance sheets using supporting schedules like the debt schedule. Is there a way I'm oblivious to that can allow me to build a DCF with just an IS & BS and no supporting schedules? If so, how do I forecast the BS without supporting schedules? Thanks in advance.
30 May 2021
Hi All, For an upcoming modeling test I have a question that hasn't really been answered here I believe. I am required to build a DCF Model and got some pretty standard assumptions to work with. However, one of the assumptions tells me to calculate the terminal value using a given P/E multiple. What is the intuition behind calculating terminal value using the P/E multiple? What implications does this have for my dcf (any different steps I need to take or things I need to consider) ? Thanks!
08 Mar 2021
Hi! I've been tasked with creating a DCF for a fiber rollout across 5 cities. Clearly the initial capex is high and is creating a lot of negative FCFs and consequently a negative EV? How long should my forecast be? Should I still be doing a terminal value or just a very long 20+ year utility like forecast? Thanks so much!
04 Jul 2021
Hi All, I am currently trying to complete a DCF, but am stuck on what I should select in terms of Capital Assets vs Capital Liabilities. Below is a screenshot of the balance sheet, I know typically Assets include: AR, Inventory, other receivables, and Other current assets. While Liabilities includes: AP, other current liabilities, and deferred revenue. But would Prepaid income taxes and prepaid expenses be included in Assets? Then for Liabiliteis what about Salaries, self insurance reserves, current operating lease payable, current portion of long term notes payable, and amount due to
11 Feb 2021
Im using the indirect method to calculate the cash flow statement. should i subtract increase in deferred tax asset and add back increase in deferred tax liability? What is a Deferred Tax Asset (DTA)? A Deferred Tax Asset is an asset on a company's balance sheet that reduces taxable income for a business. This represents a temporary difference between the cash taxes that are paid and the taxes that are reported under GAAP accounting. The DTA is found under current assets on the balance sheet. The concept is explained further in the video below.
17 Apr 2018
I have a couple of questions pertaining to calculating Cost of Debt while doing a DCF for a private company based on the projections provided by its internal finance team. The company has a bunch of preferred financing. Series A preferred – 28mm (7.85% PIK rate) Series B preferred – 19mm (7.3% PIK rate) 1) So should I include this in the cost of debt calculation for WACC or as part of Cost of Preferred ? 2) For calculation of the company's Debt/Equity composition, should this preferred be considered as Debt or as Equity ? 3) When calculating the WACC, is it more accurate to take the median of the Debt/Equity of comparable public comps of the private company or just use the Debt/Equity numbers provided in its business plan ?
16 May 2012
Quick question. If the formula for LFCF = CFO - Capex - Debt Principal payment, why do you not account for principal repayment in a DCF? The typical guide says that you only go down to CFO in a DCF, but doesn't the LFCF also subtract out debt principal payment?
25 Feb 2021
Hi, This is a conceptual question. I am confused with a DCF situation. The attached Excel file shows my calculations. I am trying to do a very simple three-period DCF by two methods: 1. deducting interest expense from cash flow 2. accruing interest expense to debt. However, for some reason the two methods are giving me different answers (the yellow cells show the answer). Theoretically, both of them should yield the same answer. Can anyone here please help me understand what I am doing wrong? Thanks.
30 Jul 2013
I'm trying to build a DCF for a financial company, but am a bit confused about how to come up with FCF and WACC because a large portion of the company's income is from interest (i.e. the company borrows a substantial amount of money (e.g. through customer deposits) and lends this out at a higher interest rate). In this case it doesn't seem to make sense to use FCF that equals EBIT(1-t)+D&A-capex-change in working capital, because this excludes the huge amount of interest income. Also, for determining WACC, what should I use as the cost of debt (the rate on deposits it pays customers, or just the rate it pays on its bonds)? Any ideas would be very much appreciated.
26 Jul 2009
If a company is currently not profitable and unlikely to be for the next 2-3 years, what tax rate do we use in the DCF when we tax EBIT? Is it reasonable to just use the long term tax rate?
27 Sep 2020
There is a line on Balance Sheet: Accumulated other comprehensive earnings. Does that go to the cash flow statement?
16 Feb 2013
Hey Guys, Quick question on the DCF. After I have NOPAT and I add back D&A and changes to NWC, I was wondering if I need to subtract out just mtx. capex or growth capex as well including acquisitions? The firm that is being valued is very acquisitive and so my thinking is that if I assume its top line growth in the future will be aided by future acquisitions, I can't give the company a "free lunch" by not subtracting out this additional capex... but obviously, you can't assume the acquisitions will continue into perpetuity. Thoughts?
10 Jul 2015
Hi, Why does the time coefficient approach yield a different result vs the first method below? Can`t see the forest from the tree.. Method one: Step 1 NOPAT * (1+G)/ WACC-G Step 2 Step-two/1+WACC^5 EV 43.242 Method two: NOPAT / (WACC-G)*Time coefficient of the last period EV 43.705 (All input variables were held constant)
31 May 2015