Introduction
Financial Modeling in Excel
Agenda
- Course Objectives
- Financial Statements
- Excel Use
- Presentation exercise
Course Objectives
- Construct and Format Financial statements using Excel
- Master using Excel for forecasting and projections
- Learn to analyze and assess investments and future performance
- Generate valuation models
- Communicate and Present Financial models efficiently
Financial statements
Review
Financial statements
1. Income statement
2. Cash flow statement
3. Balance sheet
4. Depreciation schedule
5. Working capital
6. Debt schedule
Income statement
Revenue (sales)
Cost of goods sold
Operating expenses
Other income
Depreciation and amortization
Interest
Taxes
Non-recurring and extraordinary items
Excel exercise
Balance Sheet
Assets
Liabilities
Shareholders’ Equity
Excel exercise
Cash flow statement
Cash from operating activities
Cash from investing activities
Cash from financing activities
Presentation exercise :
Excel
Plan
1- FS Flow : Interconnections
2- Financial Modeling Excel
3- Valuation
Financial statements
Flow :
Interconnections
Income statement to Cash flow
Cash flow to Balance Sheet
Financial Projections
Projections’ purpose
Sources/Assumptions
Financial Projections
Purpose

Decision making

Valuation

Accountability

Regulatory compliance
Financial Projections
Sources/Assumptions

Investor presentations

Earnings calls

Wall Street research

Data sources. Yahoo! Finance, Thomson, First Call, and Bloomberg are examples of data
sources that contain Wall Street consensus estimates.
Financial Modeling
EXCEL
Financial Modeling-IS
$M
Revenues
% Growth
COGS
COGS as % Rev
Gross Profit
GP as % Rev
Hard codes
Links
Formulas
External links
2022
40,115
5.0%
29,685
74.0%
10,430
26.0%
Actual
2023
42,321
5.5%
31,529
74.5%
10,792
25.5%
2024
44,733
5.7%
33,550
75.0%
11,183
25.0%
Financial Modeling-IS
$M
Revenues
% Growth
COGS
COGS as % Rev
Gross Profit
GP as % Rev
2022
40,115
5.0%
29,685
74.0%
10,430
26.0%
Actual
2023
42,321
5.5%
31,529
74.5%
10,792
25.5%
2024
44,733
5.7%
33,550
75.0%
11,183
25.0%
2025
47,417
6.0%
35,563
75.0%
11,854
25.0%
Estimate
2026
2027
50,262
52,775
6.0%
5.0%
37,696
39,581
75.0%
75.0%
12,565
13,194
25.0%
25.0%
2028
55,414
5.0%
41,560
75.0%
13,853
25.0%
2029
58,185
5.0%
43,638
75.0%
14,546
25.0%
Financial Modeling-IS
$M
Revenues
% Growth
COGS
COGS as % Rev
Gross Profit
GP as % Rev
Operating expenses
SG&A
SG&A as % Rev
2022
40,115
5.0%
29,685
74.0%
10,430
26.0%
Actual
2023
42,321
5.5%
31,529
74.5%
10,792
25.5%
2024
44,733
5.7%
33,550
75.0%
11,183
25.0%
7,060
17.6%
7,322
17.3%
7,605
17.0%
2025
47,417
6.0%
35,563
75.0%
11,854
25.0%
Estimate
2026
2027
50,262
52,775
6.0%
5.0%
37,696
39,581
75.0%
75.0%
12,565
13,194
25.0%
25.0%
2028
55,414
5.0%
41,560
75.0%
13,853
25.0%
2029
58,185
5.0%
43,638
75.0%
14,546
25.0%
8,061
17.0%
8,545
17.0%
9,420
17.0%
9,891
17.0%
8,972
17.0%
Financial Modeling-IS
$M
Revenues
% Growth
COGS
COGS as % Rev
Gross Profit
GP as % Rev
Operating expenses
SG&A
SG&A as % Rev
EBITDA
EBITDA %
Depreciation&Amortization
EBIT
EBIT %
Interest
Interest Expenses
Interest Income
Net Interest Expenses
EBT
EBIT %
Income Tax
Taxe rate %
Net Income
Net Income %
2022
40,115
5.0%
29,685
74.0%
10,430
26.0%
Actual
2023
42,321
5.5%
31,529
74.5%
10,792
25.5%
2025
47,417
6.0%
35,563
75.0%
11,854
25.0%
Estimate
2026
2027
50,262
52,775
6.0%
5.0%
37,696
39,581
75.0%
75.0%
12,565
13,194
25.0%
25.0%
2024
44,733
5.7%
33,550
75.0%
11,183
25.0%
2028
55,414
5.0%
41,560
75.0%
13,853
25.0%
2029
58,185
5.0%
43,638
75.0%
14,546
25.0%
7,060
17.6%
3,370
8.4%
722
2,648
6.6%
7,322
17.3%
3,470
8.2%
783
2,687
6.4%
7,605
17.0%
3,579
8.0%
850
2,729
6.1%
8,061
17.0%
3,793
8.0%
948
2,845
6.0%
8,545
17.0%
4,021
8.0%
1,005
3,016
6.0%
8,972
17.0%
4,222
8.0%
1,056
3,167
6.0%
9,420
17.0%
4,433
8.0%
1,108
3,325
6.0%
9,891
17.0%
4,655
8.0%
1,164
3,491
6.0%
181
(35)
35
2,613
6.5%
836
32.0%
1,777
4.4%
199
(42)
42
2,645
6.3%
833
31.5%
1,812
4.3%
224
(46)
46
2,683
6.0%
832
31.0%
1,851
4.1%
237
(40)
40
2,805
5.9%
870
31.0%
1,935
4.1%
251
(40)
40
2,976
5.9%
922
31.0%
2,053
4.1%
264
(40)
40
3,127
5.9%
969
31.0%
2,157
4.1%
277
(40)
40
3,285
5.9%
1,018
31.0%
2,267
4.1%
291
(40)
40
3,451
5.9%
1,070
31.0%
2,381
4.1%
Financial Modeling-CF
$M
Cash flows from operating activities
Net Income
Depreciation&amortization
Changes in operating working capital
Changes in accounts receiveable
Changes in inventory
Changes in accounts payable
Net changes in operating
working capital
Total cash flows from operating
activities
2022
Actual
2023
2024
2026
Estimate
2027
2028
2029
1,935
948
2,053
1,005
2,157
1,056
2,267
1,108
2,381
1,164
2025
1,777
722
1,812
783
1,851
850
(38)
121
136
(42)
(174)
159
(43)
(223)
164
219
(57)
(102)
-
-
-
-
-
2,718
2,538
2,599
2,884
3,058
3,213
3,375
3,545
(1,244)
3.1%
(1,227)
2.9%
(1,342)
3.0%
(1,423)
3.0%
(1,508)
3.0%
(1,583)
3.0%
(1,662)
3.0%
(1,746)
3.0%
105
(1,139)
41
(1,186)
46
(1,296)
(1,423)
(1,508)
(1,583)
(1,662)
(1,746)
Cash flows from financing activities
Short-term borrowings
Long-term borrowings
Short-term borrowings (repayments)
Long-term borrowings (repayments)
Total Cash from Operating activities
115
1,230
(95)
(131)
1,119
87
0
(78)
(166)
(157)
75
0
(66)
(178)
(169)
-
-
-
-
-
Total change in cash&cash equivalents
2,698
1,195
1,134
1,461
1,551
1,630
1,712
1,799
Cash flows from investing activities
Payments for property and
equipment : CAPEX
CAPEX % of Rev
Proceeds from disposal of property
and equipment
Total Cash from Operating activities
Forecasts
$
Quantities
Growth
Prices
Growth
Revenues
% Growth
COGS
COGS as % Rev
Gross Profit
GP as % Rev
Operating expenses
SG&A
SG&A as % Rev
EBITDA
EBITDA %
2022
1,000
10.0%
7,000
3.0%
7,000,000
13.0%
4,900,000
70.0%
2,100,000
30.0%
Actual
Estimate
2023
2024
2025
2026
2027
2028
2029
1,100
1,200
1,314
1,445
1,590
1,733
1,889
10.0%
9.1%
9.5%
10.0%
10.0%
9.0%
9.0%
7,200
7,425
7,685
7,954
8,192
8,356
8,523
2.9%
3.1%
3.5%
3.5%
3.0%
2.0%
2.0%
7,920,000 8,910,000 10,097,926 11,496,488 13,025,521 14,481,775 16,100,837
13.1%
12.5%
6.0%
6.0%
5.0%
5.0%
5.0%
5,425,200 6,059,000
6,765,610
7,702,647
8,596,844
9,557,971 10,465,544
68.5%
68.0%
67.0%
67.0%
66.0%
66.0%
65.0%
2,494,800 2,851,000
3,332,315
3,793,841
4,428,677
4,923,803
5,635,293
31.5%
32.0%
33.0%
33.0%
34.0%
34.0%
35.0%
1,125,000 1,300,500 1,480,000
16.1%
16.4%
16.6%
975,000 1,194,300 1,371,000
19.9%
22.0%
22.6%
1,666,158
16.5%
1,666,158
24.6%
1,896,921
16.5%
1,896,921
24.6%
2,162,237
16.6%
2,266,441
26.4%
2,418,456
16.7%
2,505,347
26.2%
2,704,941
16.8%
2,930,352
28.0%
Model Quick Steps
I- Income Statement
1. Input Historical Income Statement Data
2. Project revenue
3. Project all expenses
a-Leave Depreciation empty (to come from Depreciation Schedule)
b-Leave Interest Expense and Interest Income empty (to come from Debt Schedule)
4. Build to Net Income
II. Cash Flow
1. Input Historical Cash Flow Data
2. Cash Flow from Operations Projections
a. Pull in Net Income before Dividends from Income Statement
b. Leave Depreciation empty (to come from Depreciation schedule)
c. Leave Deferred Taxes empty (to come from Depreciation schedule)
d. Leave Changes in Operating Working Capital empty (to come from Operating Working
Capital schedule)
e. Project “Other” items
3. Cash Flow from Investing
a. Project Capex
b. Project “Other” Items
Model Quick Steps
4. Cash Flow from Financing
a. Leave Short Term Debt Borrowings empty (to come from Debt Schedule)
b. Leave Long Term Debt Borrowings empty (to come from Debt Schedule)
c. Pull in Dividends from Income Statement
d. Project “Other” items
5. Sum total Cash Flow
III. Depreciation Schedule
1. Project Depreciation
a. Depreciation links to Income Statement
b. Depreciation will link to Cash Flow
2. Project Tax Deprecation
3. Calculate Deferred Taxes
a. Deferred Taxes will link to Cash Flow
IV. Operating Working Capital
1. Project Each Current Asset line item
a. Each Change in Current Asset line item will link to Cash Flow
2. Project Each Current Liability line item
a. Each Change in Current Liability line item will link to Cash Flow
3. Calculate Changes in Operating Working Capital
V. Balance Sheet
1. Input historical Balance Sheet data
2. Build Balance Future Sheet balances using the Cash Flow Statement movements
Model Quick Steps
VI. Debt Schedule
1. Pull in year-end debt and cash balances from Balance Sheet
2. Calculate Cash Available to Pay Down Debt
3. Build Short Term Debt Balance
a. Calculate Interest Expense
4. Build Long Term Debt Balance
a. Calculate Interest Expense
5. Calculate Total Interest Expense
6. Calculate Cash at the end of Year
a. Calculate Interest Income
7. Link total Interest Expense to Income Statement
8. Link total Interest Income to Income Statement
Model is complete
Valuation
How much is this entity worth?
What is the appropriate price of this stock?
Valuation

Book Value : Balance Sheet
Market Value : Market Capitalization
 Enterprise Value : Enterprise value (EV) is a key metric in business valuation that represents
the total value of a company’s operating assets. It is calculated as the sum of a company’s
market capitalization (its equity value) plus its net debt (total debt minus cash and cash
equivalents). From a valuation perspective, EV reflects the cost to acquire a company, as it
includes both the equity and debt a buyer would need to assume. It’s a more comprehensive
measure than market cap alone because it accounts for the company’s financial structure,
including its debt obligations, which affect the true value for potential acquirers or investors.
In practice, EV is often used as the basis for calculating valuation multiples (such as EV/EBITDA
or EV/Revenue) to compare companies across industries and sectors.


Multiples : compare a company’s value relative to financial performance measures :
Revenue, earnings, or cash flow. Price-to-Earnings (P/E), Enterprise Value-to-EBITDA and
EV/Revenue. help assess a company’s relative value against peers or industry standards. The
choice of multiple depends on the company’s industry and stage of growth.
Three Core Methods of Valuation


Comparable Company Analysis

It is the most current of all three analyses.

It gives a market perspective.

It is based on the most recent stock prices and financials of the company.

It may be difficult to find companies to compare. The markets may be undervalued or overvalued.

Comparable Company Analysis (CCA) is a relative valuation method that determines a company’s value by comparing it to similar publicly
traded companies. The process involves identifying peers in the same industry, with similar size, growth potential, and financial
characteristics. Key valuation multiples, such as EV/EBITDA, EV/Revenue, or P/E, are calculated for these comparables and then applied to
the target company’s metrics to estimate its value. CCA is quick and market-driven but relies on the assumption that similar companies are
valued similarly in the market.
Precedent Transactions Analysis

It might be irrelevant to use the historical transaction

Might be difficult to obtain data

Precedent Transactions Analysis is a valuation method that determines a company’s value by examining the prices paid for similar
companies in past mergers and acquisitions (M&A) transactions. The process involves identifying relevant transactions in the same industry,
adjusting for factors like size and timing, and calculating the relevant multiples (e.g., EV/EBITDA, EV/Revenue) from these deals. These
multiples are then applied to the target company’s financial metrics to estimate its value. This method reflects market trends and
acquisition premiums but can be influenced by unique deal circumstances.
Three Core Methods of Valuation

Discounted Cash Flow Analysis
 Most technical
 Projections could be inaccurate
 The discount rate may be difficult to estimate
 Discounted Cash Flow (DCF) :
 based on its projected future cash flows, adjusted for the time value of money.
 The process involves forecasting free cash flows over a set period, then discounting them back to the present using a
discount rate, typically the company’s weighted average cost of capital (WACC).
 The sum of these discounted cash flows, plus the terminal value (representing the business’s value beyond the
forecast period), gives the company’s total enterprise value.
 DCF is widely used for its focus on intrinsic value, but its accuracy depends on the quality of the cash flow projections
and discount rate assumptions.
Comparable Company Analysis
●
●
Comparable Company Analysis (Comps) is a method used to value a company by comparing it to similar companies
(peers) in terms of size, industry, and geographic location. This method is based on financial multiples derived from
market data.
The key premise is that companies operating in similar markets and sectors should have similar valuation multiples.
Therefore, if a company’s multiples are lower than its peers, it might be undervalued; conversely, if they are higher,
the company might be overvalued.

Types of Multiples Used in Comps
●
Market Value Multiples: These include metrics based on market capitalization (i.e., share price multiplied by shares
outstanding). Common market multiples include:
○ Price-to-Earnings (P/E): Market Capitalization / Net Income
○ Price-to-Book (P/B): Market Capitalization / Book Value
Enterprise Value Multiples: These multiples are based on Enterprise Value (EV), which includes both equity and
debt, excluding cash. Common enterprise value multiples include:
○ EV-to-EBIT: Enterprise Value / EBIT
○ EV-to-EBITDA: Enterprise Value / EBITDA
○ EV-to-Sales: Enterprise Value / Sales
○ These are preferred over market value multiples in cases where the metric being compared is before debt (EBIT,
EBITDA), as they give a fuller picture of the company’s value.
●
Comparable Company Analysis

Process of Comparable Company Analysis
●
Step 1: Identify Comparable Companies: Companies in the same industry, of similar size, and in
similar markets are selected as comparables. The challenge arises if the company being valued
operates in a niche market or has a unique business model, as suitable peers may be difficult to
find.
Step 2: Gather Financial Data: Once comparable companies are identified, financial data such as
revenue, EBITDA, EBIT, and net income are gathered. Key data sources include annual reports,
industry databases, and financial platforms like Bloomberg or Yahoo! Finance.
Step 3: Calculate the Multiples: Using the financial data collected, the relevant multiples are
calculated for each comparable company. These multiples can be derived from the market price
or from financial reports that show EBIT, EBITDA, etc.
Step 4: Apply the Multiples to the Target Company: Once the multiples are calculated for the
peer group, they are applied to the financial metrics of the company being valued to determine
its enterprise value (EV) and equity value.
○ Example: If a comparable company has an EV/EBITDA multiple of 7x and the target
company’s EBITDA is $5 million, the target’s enterprise value would be estimated at $35
million (7 x $5 million).
●
●
●
Comparable Company Analysis

Advantages of Comparable Company Analysis
●
Current Market Data: The primary advantage of comps is that it reflects the current market
sentiment. Since it is based on real-time market data, it provides a snapshot of how similar
companies are being valued by investors.
Widely Accepted: It is a widely accepted and easy-to-understand method used by analysts in
equity research, investment banking, and corporate finance.
●

Disadvantages of Comparable Company Analysis
●
Difficulty in Finding Good Comparables: For companies with unique business models, such as
large conglomerates or niche players, finding relevant peers can be a challenge.
Market Fluctuations: If the broader market is overvalued or undervalued, it can distort the
valuation, as it would apply the same market sentiment to all companies in the sector.
Ignores Future Growth: Unlike methods like DCF, comps don’t explicitly factor in the future
growth potential of a company but are based purely on current data and market multiples.
●
●
Comparable Company Analysis

Adjustments for Comparable Analysis
●
●
Last Twelve Months (LTM): In order to make the comparison as current as possible, LTM data is
used, which combines the most recent full year with partial data from the current year’s quarter.
Calendarization: To ensure uniformity, financial data of different companies may need to be
adjusted so that their fiscal year-end matches across all comparables. This is crucial for comparing
companies that report on different fiscal schedules.

Conclusion
●
Comparable Company Analysis is a valuable tool for valuing businesses, especially when
combined with other methods like precedent transactions and discounted cash flow (DCF)
analysis. While it offers a market-driven perspective and uses real-time data, its effectiveness
depends on selecting appropriate peers and understanding market conditions that may skew the
results.
Precedent Transaction Analysis
●
Precedent Transaction Analysis (also known as Transaction Comps) is a valuation method that looks at historical
transactions (mergers and acquisitions) in the same industry to derive comparable valuation multiples.
The key concept is that the value of the company being analyzed is relative to the price others have paid for similar
companies. By looking at previous M&A deals, you can assess a fair market value for the company based on historical
premiums and multiples.

Identifying Relevant Precedent Transactions
●
The major challenge in using precedent transactions for valuation is finding relevant transactions. The target company
should be similar in terms of:
○ Industry: The transaction should involve companies within the same or a similar sector.
○ Size: The size of the companies involved should be comparable to the company being valued.
○ Geography: Transactions should ideally be within the same market region.
Timing is another important factor. Recent transactions are preferred as they reflect the current market conditions,
while older deals may be outdated due to changes in market environments, economic conditions, or business practices.
Sources for Precedent Transactions:
○ Securities Data Corporation (SDC), SEC filings (e.g., Form S-4, 8-K), annual reports, and other public documents are
primary sources for transaction data.
○ SEC filings, specifically merger proxies, contain valuable data, including detailed information on purchase price,
financial metrics, and the valuation process.
●
●
●
Precedent Transaction Analysis

Calculating the Transaction Multiples
●
Once relevant transactions are identified, the next step is to calculate multiples for those
transactions. These multiples can include:
○ Equity Value / Net Income
○ Enterprise Value / Revenue
○ Enterprise Value / EBIT
○ Enterprise Value / EBITDA
These multiples provide a framework for evaluating the target company’s valuation in the context
of similar transactions.
●
Precedent Transaction Analysis

Key Considerations and Challenges
●
Premium Paid: A notable feature of precedent transactions is the premium paid over the market
value of the company. The price in a transaction is typically higher due to the acquirer’s desire to
gain control of the company. This premium must be taken into account when evaluating similar
deals.
Transaction Market Conditions: The market environment in which a transaction occurs heavily
influences the multiples. For example, a deal completed during a market boom (e.g., 2007) might
have inflated multiples compared to one completed during a recession.
Finding Data: Obtaining detailed financial information on transactions can be difficult, especially if
the target company was private or the deal did not disclose comprehensive financials. In some
cases, data may be incomplete, and assumptions or estimates need to be made.
●
●

Advantages of Precedent Transaction Analysis
●
Reflects Control Premium: This analysis is particularly useful when valuing companies for
acquisition purposes, as it takes into account the control premium typically paid in M&A deals.
Market Validation: It offers market-based evidence of what others have paid for similar
companies, thus providing a sense of what a fair price might be.
●
Precedent Transaction Analysis

Disadvantages of Precedent Transaction Analysis
●
Difficult to Find Relevant Transactions: Especially for large, unique companies like Walmart,
finding comparable transactions may be a challenge.
Market Conditions: Since the analysis is based on past transactions, it may not be relevant if the
market conditions have significantly changed.
Data Accessibility: Even if transactions are identified, it can be difficult to obtain detailed financial
data for those deals.
●
●

Conclusion
●
Precedent Transaction Analysis is a widely used method for assessing the relative value of a
company by comparing it to past M&A transactions. While it provides useful insights, its
effectiveness depends on finding the right comparable transactions and ensuring the data is
adjusted for relevant differences in market conditions, deal structures, and the control premium.
Discounted Cash Flow Analysis

Overview of Discounted Cash Flow (DCF) Analysis
●
●
Discounted Cash Flow (DCF) is a valuation method used to estimate the value of an investment or company based on
its future cash flows, adjusted for the time value of money.
The DCF method involves projecting unlevered free cash flow (UFCF) for future years, discounting those cash flows
to their present value (PV) using a discount rate, and calculating the terminal value to represent the value of the
business after the final projected year.

Mid-Year vs. End-of-Year Convention
●
When discounting cash flows, two methods are used to calculate the present value (PV):
○ End-of-Year Convention: Assumes that each cash flow occurs at the end of the year, with Year 1 discounted by
one full year, Year 2 by two full years, etc.
○ Mid-Year Convention: Assumes that cash flows occur in the middle of the year, with the first year's cash flow
discounted by only half a year.
○ Formula for PV (End-of-Year Convention):
PV = UFCF / (1 + Discount Rate)^n
○ Formula for PV (Mid-Year Convention):
PV = UFCF / (1 + Discount Rate)^(n - 0.5)
The Mid-Year Convention is often used in practice to reflect that cash flows are generated throughout the year
●
Discounted Cash Flow Analysis

Unlevered Free Cash Flow (UFCF)
●
UFCF represents the cash a company generates after accounting for operating costs, taxes, and investments in
working capital and capital expenditures, but before any debt payments.
UFCF Calculation:
○ UFCF = EBIT + Depreciation - Changes in Working Capital - Capital Expenditures - Taxes
○ This calculation ensures that the cash flows are not impacted by the company’s capital structure, which is
important for enterprise value (EV) calculations.
●

Weighted Average Cost of Capital (WACC)
●
WACC is the discount rate used to discount the UFCF to its present value. It reflects the company’s cost of both debt
and equity, weighted by their proportions in the company’s capital structure.
WACC Formula:
○ WACC = (Equity / Total Capital) × Cost of Equity + (Debt / Total Capital) × Cost of Debt × (1 - Tax Rate)
To calculate Cost of Equity, the Capital Asset Pricing Model (CAPM) is commonly used, which factors in the risk-free
rate, the company’s beta, and the market risk premium.
○ CAPM Formula:
■ Cost of Equity = Risk-Free Rate + Beta × (Market Risk Premium)
●
●
Discounted Cash Flow Analysis

Terminal Value
●
The Terminal Value represents the value of a company beyond the final forecast year. It is calculated using either the
Multiple Method or the Perpetuity Method:
○ Multiple Method: The terminal value is calculated by applying a market multiple (e.g., EV/EBITDA) to the
company’s final year’s financial metric (such as EBITDA).
■ Terminal Value = Final Year’s Metric × Multiple
○ Perpetuity Method: The terminal value is calculated assuming a constant growth rate of the company’s cash
flows forever.
■ Terminal Value = UFCF of Final Year × (1 + Growth Rate) / (WACC - Growth Rate)

DCF Model Limitations
●
Terminal Value Sensitivity: A significant portion of a company’s total value in a DCF model can come from the
terminal value. Small changes in the assumptions (such as the growth rate or WACC) can dramatically affect the final
valuation.
Projections Accuracy: The accuracy of the DCF model depends heavily on the assumptions made for future cash
flows. Overly optimistic or pessimistic projections can lead to a significant overvaluation or undervaluation.
Discount Rate Challenges: Estimating the appropriate discount rate (WACC) can be difficult, especially when a
company has complex
●
●
Discounted Cash Flow Analysis

Conclusion
DCF is one of the most detailed and precise methods for valuing a company because it is based on the company’s
projected future cash flows. However, it requires careful and accurate assumptions regarding future performance, growth
rates, and discount rates. Despite its complexity, the DCF method is a powerful tool for investors and analysts to estimate
the intrinsic value of a company.
Example
$M
Unlevered Free Cash Flow
EBIT
D&A
Deffered Taxes
Others
Changes in Working Capital
Captal expenditures
Taxes
Total UFCF
Net Present Value calculation
Period
Discounted Cash Flow
Total Net Present Value
5.16%
Estimate
2015
2013
2014
27,888.4
8,591.7
715.9
318.0
891.3
(14,213.0)
(9,203.2)
14,989.1
29,115.5 30,026.8 30,582.4 30,750.8
9,188.6
9,809.4 10,448.9 11,101.1
1,003.5
791.0
596.3
411.4
318.0
318.0
318.0
318.0
423.2
352.8
271.3
181.3
(14,923.7) (15,520.6) (15,986.2) (16,305.9)
(9,608.1) (9,908.8) (10,092.2) (10,147.8)
15,517.0 15,868.6 16,138.5 16,308.9
1.0
2.0
3.0
14,254.1
14,032.5 13,646.8
67,815.5
$67,815.5 NPV Formula
2016
4.0
13,198.4
2017
5.0
12,683.7