DCF model
FreeValues a company by discounting the free cash flows to the firm (FCFF) of a three-statement model. Two terminal values, then the bridge from EV to equity value and value per share.
- 9 sheets
- Two 5 × 5 EV sensitivity grids
- 5 integrity checks, 3 alerts
Method
FCFF is built from the three-statement model: NOPAT (EBIT × (1 − tax rate), even when EBIT is negative), plus depreciation, plus capex (negative), plus the change in working capital (receivables, inventory, payables). Interest is not part of the flow.
Cash flows are discounted at the WACC to the close of the base year. The period is t, or t − ½ under the mid-year convention (on by default). The discount factor is 1 / (1 + WACC) to the power of the period.
The terminal value is discounted as of the end of year N under both methods. Gordon growth: final FCFF × (1 + g) / (WACC − g). Exit multiple: final EBITDA × multiple. The implied multiple and implied growth rate let you compare the two.
Bridge to equity: EV less net debt from the base-year balance sheet, less minority interests, less debt-like provisions. Value per share divides equity value by the number of shares, both in thousands.
Two 5 × 5 grids show EV: WACC × terminal growth (Gordon growth) and WACC × exit multiple. WACC must stay above g across the whole grid, otherwise the assumptions are rejected. The underlying tax calculation carries no losses forward.
What's in the file
- 01CoverCompany, date, currency, language, checks status, contents, colour conventions and disclaimer.
- 02InputsThree-statement assumptions, plus WACC, terminal growth, exit multiple, mid-year switch, minorities, provisions, shares and steps.
- 03Income statementFrom revenue to net income: gross profit, EBITDA, EBIT, interest and tax.
- 04Balance sheetAssets, liabilities and equity, base year included, with an assets minus liabilities difference line.
- 05Cash flowOperating, investing and financing cash flows, opening and closing cash, free cash flow.
- 06DebtAmortising term loan (opening, repayment, closing, interest) and the interest income calculation on cash.
- 07DCFFCFF, discounting, then both methods side by side: terminal value, EV, bridge to equity value, value per share.
- 08OutputsEV, equity value and value per share for each method, then the two EV sensitivity grids.
- 09ChecksFive integrity checks, including WACC > g, and three alerts kept out of the total.