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DCF model – Does it help?
Recently I read “Investment banking: Valuation, Leveraged Buyouts and Mergers & Acquisitions” by Rosenbaum /Pearl which inspired me to write an article explaining the theory of Discounting Cash Flow. Discounted Cash Flow analysis ( DCF ) is one of the valuation tools that help to make a proper...
What are some common acronyms used on WSO?
If you are confused by all the lingo getting thrown around Wall Street and the WSO forums, you've come to the right place. We know it can be confusing but don't worry, we are here to help! Below you will find a comprehensive list of finance acronyms for words and phrases in finance. This is a great...
What's the average discount rate for a early-stage technology company?
My bank works with very early stage companies, and I'm currently looking through some of the models and trying to understand them. WACC is calculated to be ~9% using beta derived by doing comps on capIQ. It looks like we then applied a 80% "liquidity and size" premium. This seems insanely high for...
What do you do when you can't find comprables for a DCF or a prcedent transaction?
I need some help. The private equity firm I work at (think lower-middle market firm) is planning on acquiring a professional services firm (B2B - I prefer not to disclose industry for legal reasons). The issue is the industry is miniscule and there haven't been many transactions in this industry nor...
Setting Up a Sensitivity Table for a DCF
Hey guys, I'm a trying to teach myself basic modeling in my free time. I'm having trouble creating a Sensitivity Table. I know I need to use a data table but I'm having trouble setting it up, every time I try I get that my input cells are invalid. Right now I have WACC across the top and Long Term...
What do analysts base their projections on the DCF input pages off of??
When someone makes financial estimates on the DCF input pages, what do they base those expectations off of? Economic factors mainly? Solely previous earnings?
dDd
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"Bookings" in a DCF analysis
quick question for you valuation gurus out there. have any of you valued an internet start up based on bookings (it sounds like these are deferred revenues for subscription services)? this particular company presented both the bookings figures as well as the revenue figures. first, they used the...
Break-up analysis
I'm currently valuing a conglomerate and am trying to approach with both a DCF and break-up (sum-of-the-parts) approach. I had a couple questions: 1) For the break-up analysis, the company also has a "Corporate" segment that is basically just overhead and debt interest payments. How do I include...
Help Building DCF Model
I'm currently trying to build my own DCF model. I've studied the Rosenbaum format as laid out in his Investment Banking: Valuation, Leveraged Buyouts, and Mergers & Acquisitions. Does anyone have any excel files of DCF models they've made themselves or at work that I could go off of? I would like to...
Why does a discounted cash flow approach yield Enterprise Value? Newbies GTFO
When looking at Enterprise Value in a market approach, it gives you sort of the "bare bones" total firm value. It doesn't include any cash because you'd basically be paying cash for cash. But in an income approach model you model cash as a component of current assets. As a company grows in size, it...
SBC Expense and DCF
I was hoping someone could shed some light on the opinions of the treatment of stock based compensation (SBC) expense. I have been involved on a few buy side engagements where the selling bank, and their client, has excluded SBC expenses from their historical and projected numbers. Is the rationale...
quick DCF question
say i got a company that is going public its got 4M shares held by insiders and it will issue 2M more shares shares will be priced at 13$ each what is my shareholder's equity? say hypothetically they will trade at a price of $13 dollar after the IPO , and is my shareholders equity 2M$13 or 6M$13 ?...
quick DCF questions...
Hey everyone, first post here 2 questions, 1st for DCF we discount future year cashflow and add terminal value to get EV and from there we add/subtract stuff to get our implied equity value and share price.. but what about the current year free cash flow ? why isnt that included in our calculation?...
Does unlevered cash flow exclude interest?
I've read two different interview guides (MI & WSO). One says Unlevered cash flow includes interest and the other say it excludes. which one is it? Unlevered Cash Flow The short answer is no , unlevered cash flow does not include interest. The name itself is a give-away. "Leverage" is a term that...
Two companies are same but one has DEBT and the other doesn't, which has the higher WACC?
I suppose the one without debt will have that higher WACC since debt is less expensive than equity but that doesn't make sense since if debt is less expensive, wont debt still factor into the WACC equation and cause WACC to be HIGHER?
Gonna A Run A DCF, Need Ideas for Companies to Use
Hi guys, So basically, I have to do a DCF valuation for a class and have been assigned the industrials or energy sectors. Her definition of Industrials is really broad, but it includes a variety of companies from chemicals, materials, automanufacturers, utilities, etc. and energy is energy.
Cash from Operating Activities to UCF
When doing a DCF , we are looking to discount unlevered cash flows. Normally, you would get UCF from Revenue - COGS, etc. all the way down. But lets say you start with the last line in the Statement of Cashflows - Net Cash from Operating Activity. How would you go from that to UCF?
Help Valuing A Very Negative Company
Currently working on valuing a very indebted retail company for potential takeover and having serious troubles. Operating Income is negative, EPS is negative, Net Income is negative, EBITDA is negative and jumping all over the place, Retained Earnings is negative (and growing), Cash & CE is...
Walk me through a DCF
1.) Project FCF for a certain period of time: EBIT(1-tax rate)+D &A - change in networking captial - cap ex 2.) Project cash flows beyond that period. Need a terminal value. Use a growth model or multiple. I would use the EBITDA multiple. 3.) Now, discount that back to the present using the WACC ....
How Much is America Worth?
Trump's got one hell of a DCF to model....
Discounted Cash Flow
Hey guys so I am doing a presentation on a particular stock and I am trying to figure out how to calculate DCF . I have used multiple sources and have come to no avail. Can someone please explain to me a basic model someone can use to obtain a firm's DCF? Thanks
DCF with Negative Free Cash Flow
Guys, a quick question. I am doing a DCF for a utility power company and right now it has positive EBITDA but negative FCF due to very high Capex. Obviously I am assuming that it will generate positive FCF in the future( in line with equity research reports I read on the firm). My question is that...
HELP: Stub Period (DCF)
Can somebody explain the concept of a "stub period"? And how would this be incorporated in a DCF model? For example, if there is a stub period Q4 of year 1 or Q3 of year 1. (I understand discount periods change, but not sure why/how) I've read some sources that a stub period is "a period of time...
DCF of Banker's Life
Does anybody have a copy of the DCF Valuation of an Investment Banker's Life? There is a model that was circulating around in late 2007 that I lost a copy of but it's hilarious. The original site it was posted on was Bankersball.com which no longer exists. If anyone could repost it somewhere and let...
Valuation: non-operating assets & operating liabilities
Hey guys, I am wondering about the correct theoretical explanation for two valuation-related issues and would be glad if someone could shed some light on these. 1) When going from Enterprise Value ( EV ) to equity value (EqV), we are adding non-operating assets and vice versa, we are subtracting...
Intriguing Technical Question
Hi guys, I have a technical question in relation to DCF and capital raisings that some of you might be able to help me with: - When doing a DCF for capital raising purposes (more specifically new equity), after discounting the cash flows and summing them to the PV of Terminal Value you would get to...
DCF - Tax or Book Depreciation?
When doing a DCF , should you be using the company's book depreciation, or tax depreciation? I assume tax, but wanted to check.
Valuing mining company, DCF finite ou infinite?
Hi everybody, I creater a DCF model to value mining companies. I've got one big problem pour the terminal value because i've two options: Finite life: a mine doesn't last forever, lets say 20 yrs or 40 yrs, Infinite life: with the classic terminal value (FCFF actualized/K-G) Lots of people use a...
Associates and Minorities in a DCF
Struggling with the proper way to capture associate and / or unconsolidated JV income in a DCF . Our standard model captures operating income and free cash items, but does not offer a sensible place to insert this 'dividend' stream. Reverse question related to how to back out minorities that have...
Mcdonalds beating...will affect the stock price Monday?
I believe if it goes on CNBC/MNSBC/CNN/FOX NEWS then the stock will take a hit. It will play out like this.... 1. Major news stations get a hold of it. 2. They run clip and bring in panel of "experts" that argue about race in America or sex in America etc. 3. Then the next segments will be showing...
Are EV multiples a mini DCF....a market's view on the intrinsic value of the company?
The way I see ev / ebitda multiple for example, is a shortened mini-dcf. The EQUITY in the EV is the market's view (assumptions) on growth, capex and discount rate, all represented in a DCF . Else, how would a market value a company. The idea that DCF is an intrinsic way of valuing a company and...
Real Estate DCF Valuation (upcoming interview!)
Hey guys, Can someone help me to understand real estate DCF valuation specifics? How exactly is the WACC calculated for a real estate DCF model? Does the tax shield diminish the cost of dept like in the classical WACC calculation? Maybe a silly question, but does WACC calculation interfere with the...
dividends and DCF
Question: How does one account for dividends in a DCF (assume WACC = cost of equity) 1) Ignore dividends and use WACC to calculate the firm value (In this case would Firm Value = Equity Value?) 2) If one were to calculate the the FCFE -> this would ignore dividends as well, since all the FCFE...
Navy Suit light or dark
Guys, Im looking for a navy suit in the range of 500-600 any help. Like a french navy suit, light on the color. dont want the dark shade of navy.
EV Formula for Banks ... ?
I have an interview coming up on monday for a FIG position. And I got some open questions about valuation: Obviously it is most appropriate to apply DDM or Equity Comps (such as PE , P/B) for a bank valuation. What is then the enterprise value of a bank? To my understanding the usage of equity...
Wall Street Prep vs Wall Street Training
So, I've already taken Wall Street Training, the Advanced Financial and Valuation Modeling course. I had no experience prior to the course, so I learned quite a bit about DCF , EV , Market Comps, etc. Now, Wall Street Prep is hosting a training seminar at my b-school this spring. It is a course...
Valuing an auto maker?
How to value an auto manufacturer? Think F, GM, Toyota. Very cyclical, DCF might not be the best idea. EV / EBITDA would standardize for tax differences between international comps , but I feel as if pension obligations should be thrown in there as well (maybe EV /EBITDARPO , D&A, rent, pension...
real cash expenses NOT reflected in DCF...possible?
Say somehow you know a company will be pursuing an aggressive acquisition policy going forward with its cash balances, or will be purchasing a lot of marketable securities with its cash in the future. Both of these represent investing cash flows, but it's not reflected in FCF since they are not...
DCF - forecast period HELP
I am confused when people say that the forecast period is determined by the amount of time it takes for a company to reach a "steady state of growth." If I assume a 3 year forecast period for company XYZ now, it doesn't mean I actually expect that a company will grow at a constant rate to infinity 3...
Model from scratch?
What does building a model from scratch mean? does it mean opening up a blank piece of excel sheet and inputting everything, including account titles and formatting? I'm taking a course on financial modleling, and feel like the latter is extremely hard without any preexisting templates.
Want To Practice Running a DCF
I've been reading a little bit about DCFs and want to practice modeling out a DCF on my own. Does anyone know what the best way to get started on doing something like this is? I'm guessing that trying to model a very large company would be challenging, so would it be best to start with a small cap?...
Tips: Running A DCF
Does anyone have tips to run a quick and dirty DCF for a company? Or any good templates to use for that matter? I have the WSO one but it is a bit more than what I want. Whats the length of time that it would take you to do one?
DCF Questions
Maybe we can get a thread going for all modeling questions? For example, In constructing a DCF for an ER report....... Do most poeple reconsctruct the I/S and balance sheet from what's reported on SEC.GOV? All the templates i've seen online where high level........(I.e Sales, COGS, SG&A, EBIT, I,...
mention updated dcf model experience?
hi guys, during my internship, i helped update a few DCF models.....thus i dont know DCF models inside-out because i didnt create them cell by cell but i did update the models that were created by someone else by using Bloomberg's estimates.......you think its worth including that i updated dcfs on...
Questions on DCF
I have been learning more and more about DCF 's and other valuation models lately and have two questions that I can't find answers for. 1. Why is weighted average cost of capital used and not marginal cost of capital? Wouldn't marginal cost of capital be more representative of the actual cost? 2....
DCF Question - Discount question?
I have a simple question about DCF analysis. Let's say I was going to buy a company on July 1, 2010. I have all of my FCF 's projected out, and my terminal value calculated, also. Let's say that YTD (6/30/10) actual 2010 FCF is $60 and the projected year-end FCF is $110 (so you're projecting $50...
Beginners question DCF
Hi Guys, Question with regards to following: "If we assume that the coffee shop is in operation for 5 years and we use a 10% WACC , then its value would be: Value = 31,500 + 31,500/ 1.1 + 31,500/1.1^2 + 31,500/1.1^3 + 31,500/1.1^4 = $131,000" Questions: 1. Why is there no terminal year value...
Few technical questions about DCF
Hello guys, Thanks for the forum, very helpful. I have a few questions about DCF and would appreciate your replies: 1. I understand that in finding the WACC , the "appropriate" capital structure for the target should be used and not the current capital structure. How do you go about finding this...
NPV/DCF Practice
So I was thinking about a practical problem today, and I decided to calculate the NPV of the DCF for it (in excel). I was hoping someone would check my answers to see if I did it correctly (I figured maybe some others are looking for some practice with this stuff). Here's the problem: Suppose I am...
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