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DCF Model

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anilkewlani17
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33 views

DCF Model

Uploaded by

anilkewlani17
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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1.

DCF Model Setup:

You’ll need to work with the provided Excel files for either the 'advanced' or 'basic' model. Based on
the instructions, start with the 'advanced' version for practice and fall back on the 'basic' version if
needed.

The key inputs for your DCF will be:

• Revenue Growth: Use the 5-year plan for the company's revenue forecasts from FY2020 to
FY2024.

• EBITDA: Same as revenue for forecasting and adjusting for the given margins.

• Capex & Depreciation: These will be based on historical values and should follow the given
percentages of revenue from historical financials.

• Free Cash Flow: Use the free cash flow estimates for the years 2020–2024 as a base for
forecasting beyond 2024.

• WACC: Set to 8.5% based on assumptions.

• Perpetuity Growth Rate: Set to 0.5% with a step-up of 0.25%. This will be used for terminal
value calculations.

• Discount Factor: Based on WACC for the DCF.

Steps in the model:

• Input the assumptions (including current share price, market cap, net debt, and other
values) into the "Key Assumptions" tab.

• The Revenue, EBITDA, and other financial values need to be extrapolated for future years
beyond the 5-year forecast using historical trends or flat assumptions where necessary.

• Use the NPV Perpetuity Growth Method to calculate the terminal value at the end of year 5
(using perpetuity growth and the WACC).

• Ensure the model includes a sensitivity analysis for key variables like WACC and the
perpetuity growth rate.

Once the DCF model is complete, you’ll get the enterprise value (EV) and can compare this to the
market cap and debt levels to derive the equity value.
2. Summary Slide Preparation:

The slide needs to clearly present the valuation output, key assumptions, and a few key metrics. Use
the provided template for the structure. Here’s what to include:

• Title: "DCF Valuation Summary"

• Key Valuation Results:

o DCF Valuation: Based on your output from the model.

o Market Cap: As provided in the assumptions.

o Net Debt: From the assumptions (84.6 million).

o Equity Value: Market Cap minus Net Debt, adjusted by any other factors.

• Key Assumptions (simplified from what’s given):

o Revenue Growth: Based on the 5-year forecast (with year-over-year growth rates).

o EBITDA Margin: From the historical values (or adjusted).

o WACC: 8.5%, with a sensitivity range (say, 8.0%–9.0%).

o Perpetuity Growth Rate: 0.5%, with sensitivity at 0.25%–0.75%.

• Sensitivity Analysis:

o Present a simple table or chart showing how variations in WACC and perpetuity
growth rate affect the valuation.

o Example: Change WACC between 8.0%–9.0% and perpetuity growth between 0.25%
and 0.75%.

• Conclusion: A sentence or two summarizing the result of the valuation and what it implies
about the company's equity value relative to market price (whether it's over or undervalued
based on your model).

3. Review and Finalization:

• Once the DCF model and slide are prepared, it’s good to cross-check the numbers to make
sure the assumptions are consistent and reasonable.

• You mentioned reviewing this together this afternoon before submission, which is a great
step. During that review, you can make any final tweaks based on feedback and ensure
everything aligns.

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