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Wall Street Prep Financial Modeling Quick Lesson DCFQL
Wall Street Prep Financial Modeling Quick Lesson DCFQL
Terminal Value
Growth in perpetuity method:
Long term growth rate 4.0%
WACC
Free cash flow (t+1)
Terminal Value
Present Value of Terminal Value
WACC
Share Price
Diluted Shares Outstanding
Cost of Debt 5.2%
Tax Rate 40.0%
After-tax Cost of Debt
Cost of Equity 15.0%
Debt Weighting
Equity Weighting
WACC =
Enterprise Value to Equity Value
Enterprise Value
Less: Net debt
Equity Value
Diluted Shares Outstanding
Equity Value Per Share
Q: If the stock is trading at $25.00 a share and you believe that your DCF analysis is accurate, would you buy or sell stock i
A SIMPLE DISCOUNTED CASH FLOW MODEL
Terminal Value
Growth in perpetuity method:
Long term growth rate 4.0%
WACC 12.0%
Free cash flow (t+1) 2,052.8
Terminal Value 25,706.3
Present Value of Terminal Value $14,595.8
WACC
Share Price $25.00
Diluted Shares Outstanding 500.0
Cost of Debt 5.2%
Tax Rate 40.0%
After-tax Cost of Debt 3.1%
Cost of Equity 15.0%
WACC = 12.0%
Enterprise Value to Equity Value
Enterprise Value $20,340.1
Less: Net debt 2,750.0
Equity Value $17,590.1
Diluted Shares Outstanding 500.0
Equity Value Per Share $35.18
Q: If the stock is trading at $25.00 a share and you believe that your DCF analysis is accurate, would you buy or sell stock i
A: Buy, because according to intrisic valuation, stock should actually be valued at $35.18 but market value is $25.00. Ther
A SIMPLE DISCOUNTED CASH FLOW MODEL