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Advanced discounted cash flow valuation model (DCF)

 

Get your own copy of advanced DCF template!

 

The product includes unpopulated excel sheet ready to be filled with assumptions, but also already finalized valuation of Amazon and Visa for your convenience, learning and understanding how the model works!

 

In addition to features of standard DCF valuation model the advanced model includes following features:

  1. It measures the value of a company in all explicit periods of projection, not only in period zero, so it is dynamic valuation. Value is not static, and major investments or share repurchases in period 1 can alter the valuation of a company in period 2 in a way which might surprise you. In this template you can understand this impacts better.
  2. One of the most important changes is, in addition to abovementioned dynamic valuation in future periods, I introduce retrospective valuation in historical 4 year period. This immensly improves accuracy of projections going forward, as it gives transparency on what assumption on ROIC, discount rate and growth did market apply on the company, and helps to triangulate whether these assumptions support assumption for future years and by benckmarkting with many other comparable companies you can easily get a sense on appropriate ROIC, discount rate and growth. I always missed that in standard DCF models and find it very useful in my valuations.
  3. It values a company using two universally accepted DCF methods and reconcile them so they are aligned - Free cash flow to equity (FCFE), and Free cash flow to firm (FCFF).
  4. It introduces controlling mechanism by using return on invested capital (ROIC) to project EBIT in P&L, so we bring this core driver of value in action instead of keeping it hidden as most valuation models do. You will come to appreciate that return on invested capital is one of three key drivers of value, together with growth rate and cost of capital, and majority of valuation models we see in practice do not even measure it.
  5. It explicitly presents how total shareholder returns (TRS) reconciles with cost of capital, both on Cost of equity level and WACC level. Furthermore it slices and dices TRS for sources of growth to measure what part is organic growth, which part is due to retaining excess cash in the business, what part comes from share repurchases or dividends. This allows to explicitly link dividned distribution policy with projected TRS.
  6. It builds projected balance sheet as well, which is a great way to understand completeness, accuracy and reasonableness of projections, which is often omitted in classic valuation models.
  7. It uses dynamic cost of capital so you can vary its assumptions across periods which is what really happens in real life as risk free changes as monetary policy can dramatically change in the period of 10 years.
  8. It expands projection period from standard 5 years to 10 years to be able to understand how dynamic valuation changes as assumptions change.
  9. It brings out to light which debt assumptions are implied within weighted average cost of capital, so you can better understand debt level and cash flow from debt, and plan capital structure for a new company.
  10. It calculates valuation multiples (EV/S, EV/EBITDA, EV/EBIT, P/E, P/B) in two ways, first via simple calculation based on DCF outcome, and second by direct formula which calculates a valuation multiple by plugging in directly growth rate, margin assumption, discount rates, return on equity or invested capital and tax rates. This helps triangulate reasonableness of assumptions and shines light on appropriatenes of valuation.

Advanced discounted cash flow valuation model (DCF)

SKU: 1016
€ 49,00Price
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