1394 Words6 Pages

DCF Modeling

Copyright 2008 © by Wall Street Prep, Inc.

***************************** SAMPLE PAGES FROM TUTORIAL GUIDE *****************************

Table of contents

SECTION 1: OVERVIEW DCF in theory and in practice Unlevered vs. levered DCF SECTION 2: MODELING THE DCF Modeling unlevered free cash flows Discounting to reflect stub year and mid-year adjustment Terminal value using growth in perpetuity approach Terminal value using exit multiple approach Calculating net debt Shares outstanding using the treasury stock method Modeling the weighted average cost of capital (WACC) Sensitivity analysis using data tables Modeling synergies

***************************** SAMPLE PAGES FROM TUTORIAL GUIDE ******************************…show more content…*

Projected income and cash flow streams are after interest expense and net of any interest income: Net income - Increases in working capital +/- Deferred taxes + D&A ***************************** expenditures - Capital +/- Net SAMPLE PAGES FROM TUTORIAL GUIDEborrowing Levered FCF 6 For illustrative Purposes Only

Historical

•Income Statement (10-K / 10-Q / PR / Company) •Use normalized EBIT Use effective tax rate CFS / IS / Footnotes

Projections

Analyst research Company Internal projections Use marginal tax rate Analyst research Company Internal projections

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Modeling unlevered free cash flows

Always remember to: Footnote assumptions in detail Test your assumptions Use consistent cash flows and costs of capital

Reference from core model

Input WACC of 10% for now. ***************************** We will calculate wacc shortly. SAMPLE PAGES FROM TUTORIAL GUIDE For illustrative Purposes Only *****************************

Calculation = days post-deal date / 365

7

Discounting to reflect

Copyright 2008 © by Wall Street Prep, Inc.

***************************** SAMPLE PAGES FROM TUTORIAL GUIDE *****************************

Table of contents

SECTION 1: OVERVIEW DCF in theory and in practice Unlevered vs. levered DCF SECTION 2: MODELING THE DCF Modeling unlevered free cash flows Discounting to reflect stub year and mid-year adjustment Terminal value using growth in perpetuity approach Terminal value using exit multiple approach Calculating net debt Shares outstanding using the treasury stock method Modeling the weighted average cost of capital (WACC) Sensitivity analysis using data tables Modeling synergies

***************************** SAMPLE PAGES FROM TUTORIAL GUIDE *****************************

Projected income and cash flow streams are after interest expense and net of any interest income: Net income - Increases in working capital +/- Deferred taxes + D&A ***************************** expenditures - Capital +/- Net SAMPLE PAGES FROM TUTORIAL GUIDEborrowing Levered FCF 6 For illustrative Purposes Only

Historical

•Income Statement (10-K / 10-Q / PR / Company) •Use normalized EBIT Use effective tax rate CFS / IS / Footnotes

Projections

Analyst research Company Internal projections Use marginal tax rate Analyst research Company Internal projections

*****************************

Modeling unlevered free cash flows

Always remember to: Footnote assumptions in detail Test your assumptions Use consistent cash flows and costs of capital

Reference from core model

Input WACC of 10% for now. ***************************** We will calculate wacc shortly. SAMPLE PAGES FROM TUTORIAL GUIDE For illustrative Purposes Only *****************************

Calculation = days post-deal date / 365

7

Discounting to reflect

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