About This Model
This Discounted Cash Flow Model uses Unlevered Free Cash Flow as the basis for the DCF valuation. Unlevered Free Cash Flow reflects the cash flow that is available to all providers of capital including equity, debt and hybrids.
This DCF model is based on annual cash flows and runs for a five (5) year period. At the end of the five years, the terminal value of the business is calculated using an EBITDA multiple. Cash flows are discounted to present values using the company’s weighted average cost of capital.
This model requires the following inputs, which are to be entered in the yellow shaded cells:
- Weighted Average Cost of Capital (WACC)
- Terminal EBITDA multiple
- Year 1 revenue and expenses
- Annual growth in revenue and expenses – from years 2 to 5
- Corporate income tax rate
- Annual depreciation expense
- Annual capital expenditure
- Annual change in working capital
The key output from this model is the Enterprise Value — which reflects the market value of the whole company — that is the sum of claims of all the security-holders including debt, preferred and common equity, minority shareholders, etc.
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