Discounted Cash Flow (DCF) Model Template
November 22, 2023
Discounted Cash Flow (DCF) Model Template
Use our DCF Model Template for your financial valuations. Forecast future cash flows and determine the present value of these cash flows by discounting.
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Steps for Using the DCF Template
- Download the template
- Input your own numbers in place of the example numbers in the blue font color cells
- Add or cut line items as needed (select the row with your mouse, right click and choose Insert, or Delete)
- Ensure that the formulas in the black font color cells include all your new line items
- You now have your own cash flow statement
To Build a DCF model, Follow These Steps:
- Project free cash flows (FCF):
This is the cash flow generated by the company’s operations after all cash expenses have been paid. To project FCF you will need to forecast the company’s revenue, costs, and capital expenditures for a detailed projected period of 5 to 10 years.
- Choose a discount rate:
The discount rate is the rate at which future cash flows are discounted to their present value, representing their current worth. A higher discount rate will result in a lower valuation, and vice versa. One common approach to discounting is to use the weighted average cost of capital (WACC). The WACC is the average cost of capital that a company uses to finance its operations.
- Calculate the terminal value (TV)
While the FCFs reflect the cash flows from the detailed projected period (for example 5 years), the terminal value is the value of the company at the end of the projection period. It is calculated by discounting the company’s cash flows beyond the projection period to their value at year 5. One common approach to calculating the terminal value is to use a perpetual growth model. The perpetual growth model assumes that the company will grow at a constant rate in perpetuity.
- Calculate the enterprise value (EV)
The enterprise value (EV) is the total value of the company’s operations. It is calculated by discounting the company’s FCF and terminal value to their present value.
- Calculate the Equity Value
The equity value is the value of the company’s attributable to shareholders. It is calculated by subtracting net debt from the enterprise value.
The Investment Banker
Acquire the hands-on expertise needed to support the primary goals of investment banking: raising capital and executing mergers and acquisitions. Whether you are an intern aiming to impress interviewers, an analyst fast-tracking your career, or an associate strengthening your foundational knowledge, this course is structured to cultivate practical skills on your own schedule. It encompasses accounting, financial modeling, valuation (comprising trading comparables, discounted cash flow and weighted average cost of capital, or WACC), as well as M&A (mergers and acquisitions) and LBO (leveraged buyout) analysis.
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