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Tutorial On How To Use The DCF Model. Good Luck!: Date

The document provides information on using the discounted cash flow (DCF) model to value a business. It includes a tutorial link, financial projections, WACC calculation, and implied valuation multiples from using the DCF model. The document demonstrates how to apply the DCF approach to value an example company.

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Tanya Singh
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249 views9 pages

Tutorial On How To Use The DCF Model. Good Luck!: Date

The document provides information on using the discounted cash flow (DCF) model to value a business. It includes a tutorial link, financial projections, WACC calculation, and implied valuation multiples from using the DCF model. The document demonstrates how to apply the DCF approach to value an example company.

Uploaded by

Tanya Singh
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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Please see business-valuation.

net
tutorial on how to use the DCF model
luck!

Date: 3/19/2018
Author: Business-valuation.net
aluation.net for a
e DCF model. Good
Input
Last Fiscal Year 2017
Corporate tax rate 30%
Actual Forecast p
2014A 2015A 2016A 2017A 2018E

Net sales 2,955 3,568 4,102 4,663 5,036


growth, % 20.7% 15.0% 13.7% 8.0%
COGS -2,098 -2,516 -2,831 -3,310 -3,544
Gross profit 857 1,053 1,272 1,352 1,492
margin, % 29.0% 29.5% 31.0% 29.0% 29.6%
OPEX -180 -200 -210 -215 -224
growth, % 11.1% 5.0% 2.4% 4.0%
in % of net sales 6.1% 5.6% 5.1% 4.6% 4.4%
EBITDA 677 853 1,062 1,137 1,268
margin, % 22.9% 23.9% 25.9% 24.4% 25.2%
Depreciation -49 -63 -75 -84 -88
in % of net sales 1.6% 1.8% 1.8% 1.8% 1.8%
EBIT 628 790 987 1,053 1,180
Tax (30%) -119 -138 -151 -164 -354
Capex -79 -41 -169 -115
in % of net sales 2.2% 1.0% 3.6% 2.3%
Increase/Decrease in NWC -25 -5 -2 -15
Unlevered Free Cash Flow 611 865 802 785

DCF-valuation Implied multiples 2017A


Enterprise value ("EV") 11,012 Sales 2.4x
Equity value ("market cap") 10,812 EBITDA 9.7x
Price per share 1.08 EBIT 10.5x

Source: business-valuation.net

Terminal Value
Terminal Year Free Cash Flow 995
Perpetuity Growth Rate 2.0%
Terminal Year EBITDA 1,591
Terminal Value 12,250
Implied Exit Multiple 8.1x
Discount Period 5.0
Discount Factor 0.6
Present Value of Terminal Value 7,508
% of Enterprise Value 68%
Forecast period CAGR CAGR
2019E 2020E 2021E 2022E 2014-2017A 2018-2022E

5,388 5,711 5,997 6,237 16.4% 5.5%


7.0% 6.0% 5.0% 4.0%
-3,792 -4,019 -4,220 -4,389 16.4% 5.5%
1,596 1,692 1,777 1,848 16.4% 5.5%
29.6% 29.6% 29.6% 29.6%
-232 -240 -249 -257 6.1% 3.5%
3.8% 3.6% 3.4% 3.3%
4.3% 4.2% 4.1% 4.1%
1,364 1,452 1,528 1,591 18.9% 5.8%
25.3% 25.4% 25.5% 25.5%
-95 -100 -105 -110 19.8% 5.5%
1.8% 1.8% 1.8% 1.8%
1,270 1,351 1,423 1,481 18.8% 5.9%
-381 -405 -427 -444 11.4% 5.9%
-123 -130 -136 -142 n.a. 0
2.3% 2.3% 2.3% 2.3%
-14 -13 -11 -9
847 904 954 995

2018E 2019E 2020E 2021E


2.2x 2.0x 1.9x 1.8x
8.7x 8.1x 7.6x 7.2x
9.3x 8.7x 8.1x 7.7x
Wacc Calculation

Target Capital Structure


Debt to Total Capitalization 29.1%
Equity to Total Capitalization 70.9%
Debt to Equity Ratio 41.8%

Cost of Equity
Risk-free rate (2) 2.5%
Market risk Premium (3) 7.1%
Levered Beta (4) 1.22
Size Premium (5) 1.7%
Cost of Equity 12.8%

Cost of Debt
Cost of Debt 6.0%
Corporate tax rate 30.0%
After Tax Cost of Debt 4.2%

WACC 10.3%
Comments

Obtained from Beta and Capital Structure tab


Obtained from Beta and Capital Structure tab

Interpolated Yield on 10-year Treasury bond


Obtained from Ibbotson SBBI Valuation Yearbook
Obtained from Beta and Capital Structure tab
Low-Cap Decile size premium based on market capitalization, per Ibbotson

Obtained from Input sheet


Comparable Companies Unlevered Beta

Levered Beta Market Value of Market Value of Equity/ Total


Company Debt/ Equity
(1) Debt (2) Equity (3) Assets
[XYZ] 1.23 500 1125 44.4% 69.2%
[XYZ] 1.31 400 868 46.1% 68.5%
[XYZ] 1.15 450 788 57.1% 63.6%
[XYZ] 1.12 375 1125 33.3% 75.0%
[XYZ] 1.25 250 900 27.8% 78.3%
Median 1.23 44.4% 69.2%
Mean 1.21 41.8% 70.9%

(1) From Bloomberg


(2) Book Value of Debt
(3) From Bloomberg
(4) Unlevered Beta = Predicted Levered Beta / (1 + Debt/Equity) x (1-t))

Target
Relevered Mean Unlevered Mean Target Relevered
Marginal Tax
Beta Beta Debt/ Equity Beta
Rate

Target Company 0.94 41.8% 30% 1.22


Unlevered
Tax Rate
Beta (4)
30% 0.94
30% 0.99
30% 0.82
30% 0.91
30% 1.05
0.94
0.94

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