Front cover of DCF Modeling manual in Premium Package

You will learn step-by-step DCF modeling, using free cash flows already projected in the financial modeling module. Learn how to estimate the weighted average cost of capital (WACC), including several approaches to calculating terminal value. Finally, we will use data tables to analyze a broad range of scenarios given different assumptions.

Modeling free cash flows (FCF)

• Unlevered vs. levered FCF
• Capitalizing inappropriately classified expenses
• Handling stub periods and midyear adjustments
• Handling working capital items, deferred taxes and long-term accruals
• Integrating synergy assumptions into the DCF model
• Common pitfalls - enterprise vs. equity value, unlevered vs. levered FCF

Discounting the cash flows

• Deriving the cost of debt
• Derive the cost of equity using CAPM
• Delevering and relvering beta
• Estimating the weighted average cost of capital (WACC)
• Determining the optimal WACC
• Avoiding inconsistency between the FCF and discount rate

Estimating terminal value

• Perpetuity approach
• EBITDA multiple approach
• Common pitfalls

From enterprise value to equity value per share

• Calculating net debt and treatment of debt equivalents such as preferred stock, convertible securities , capital leases , and minority interest
• Calculating options and convertible securities using both the standard and treasury stock methods

Sensitivity analysis

• Using data tables to analyze a broad range of scenarios given different assumptions