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Cash Flow: Assumptions

The document presents a discounted cash flow model to value a company. It lists assumptions for tax rate, discount rate, perpetual growth rate, and EV/EBITDA multiple. It then shows projected cash flows, capital expenditures, and net working capital changes over five years. It discounts these cash flows using the WACC to calculate an intrinsic equity value per share of $33.63, higher than the current market price of $25.

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721 views3 pages

Cash Flow: Assumptions

The document presents a discounted cash flow model to value a company. It lists assumptions for tax rate, discount rate, perpetual growth rate, and EV/EBITDA multiple. It then shows projected cash flows, capital expenditures, and net working capital changes over five years. It discounts these cash flows using the WACC to calculate an intrinsic equity value per share of $33.63, higher than the current market price of $25.

Uploaded by

GolamMostafa
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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DCF Model

Assumptions
Tax Rate 25% Cash Flow
Discount Rate 12% $50,000 $47,008
$43,510
Perpetural Growth Rate 3% $41,501
$40,000 $37,715
EV/EBITDA Mulltiple 7.0x
Transaction Date 12/31/2017 $30,000
Fiscal Year End 6/30/2018
$20,000 $17,747
Current Price 25.00
Shares Outstanding 20,000 $10,000
Debt 30,000
$0
Cash 239,550 1/1/2018 1/1/2019 1/1/2020 1/1/2021 1/1/2022
Capex 15,000

Discounted Cash Flow Entry 2018 2019 2020 2021 2022 Exit Terminal Value
Date 12/31/2017 6/30/2018 6/30/2019 6/30/2020 6/30/2021 6/30/2022 6/30/2022 Perpetural Growth
Time Periods 0 1 2 3 4 EV/EBITDA
Year Fraction 0.50 1.00 1.00 1.00 1.00 Average
EBIT 47,814 51,095 55,861 58,693 63,039
Less: Cash Taxes 11,954 12,774 13,965 14,673 15,760
Plus: D&A 15,008 15,005 15,003 15,002 15,001
Less: Capex 15,000 15,000 15,000 15,000 15,000
Less: Changes in NWC 375 611 398 511 272
Unlevered FCF 35,494 37,715 41,501 43,510 47,008
(Entry)/Exit (290,450) 542,129
Transaction CF - 17,747 37,715 41,501 43,510 47,008 542,129
Transaction CF (290,450) 17,747 37,715 41,501 43,510 47,008 542,129

Intrinsic Value Market Value Rate of Return


Enterprise Value 462,983 Market Cap 500,000 Target Price Upside
Plus: Cash 239,550 Plus: Debt 30,000 Internal Rate of Return (IRR)
Less: Debt 30,000 Less: Cash 239,550
Equity Value 672,532 Enterprise Value 290,450 Market Value vs Intrinsic Value
Market Value
Equity Value/Share 33.63 Equity Value/Share 25.00 Upside
Intrinsic Value

Instructions
Step 1: Get EBIT and D&A from the income statement
Step 2: Calculate the net working capital
There are two ways to find NWC:
1. NWC = Current Assets (less cash) - Current Liabilities (less debt)
2. NWC = Accounts Receivable + Inventory - Accounts Payable
537,981
546,278
542,129

35%
26%

vs Intrinsic Value
25.00
8.63
33.63

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