Question:

Walk me through a DCF

Remove Bookmark

Answer hidden.

Answer:

In a DCF analysis, you value a company with the Present Value of its future Free Cash Flows plus the Present Value of its Terminal Value.

First, Project a company’s Free Cash Flow over a period of time (usually 5-10 years)
Calculate the company’s Discount Rate
Discount the cash flows back to their Present Value and sum them up
Calculate the company’s Terminal value
Discount the Terminal Value to its Present Value
Add the discounted Free Cash Flows to the discounted Terminal Value

Other

DCF

How do you calculate beta?

Why do you usually project out 5-10 years in a DCF?

Would you expect the WACC to be higher for a $1 billion or $100 million market cap company?

How do you calculate WACC?

What is the mid-year convention and why would you use it in a DCF?

Which company would we expect to have a higher beta, an industrials company or an internet company?

What are the formulas for un-levering and levering Beta?

What is beta?

Would you expect the cost of equity to be higher for a $1 billion or $100 million market cap company?

What happens if you use Levered Free Cash Flow instead of Unlevered Free Cash Flow in your DCF?

Walk me through how to get from Revenue to Unlevered Free Cash Flow in your DCF projections

What happens to WACC as you increase leverage?

How do you determine the discount rate in a DCF?

How do you calculate cost of equity?

How do you calculate terminal value?

How do you select the appropriate exit multiple when calculating terminal value?

What is a potential issue with basing terminal multiples on current public company multiples?

How do you calculate WACC for a private company?