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Courses > Valuation > Discounted Cash Flow (DCF) Analysis > Discounted Cash Flow (DCF) Valuation

Discounted Cash Flow (DCF) Valuation1 day
ClassroomIntroductory


Taking an integrated financial model of the target company, participants calculate the unleveraged free cash flows. A detailed ratio analysis establishes the reasonableness of the forecasts and identify when the target company reaches steady state. Participants calculate the terminal value using the Gordon growth model and multiple methods. The cash flows are discounted using WACC calculation and a mid-year adjustment is made.

Once the valuation is complete, participants perform several checks on the analysis using key ratios and sensitivity and scenario analysis.

  • Building a discounting model
  • Making mid-year adjustments
  • Arriving at equity value

Calculating unlevered free cash flows

  • Drivers of cash flow
  • Ratio analysis

Calculating the terminal value

  • Perpetuity
  • Multiples

Sanity check

  • Reinvestment rate and ROIC
  • Implied multiples and growth rates
  • Percentage of value in the terminal value

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Applying the "sanity check" to cash flow projections and terminal value

Pre-requisites

None

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