DCF Valuation Analysis
Recognize and avoid the most common errors that finance professionals make when creating a DCF analysis
This hands-on course is focused on the practical implementation of a Discounted Cash Flow (“DCF”) valuation analysis. The skills required to build a DCF analysis will be discussed and incorporated into a financial model. Participants will learn to recognize and avoid the most common errors that finance professionals make when creating a DCF analysis. This course will also include a number of Excel tips and skills to help a user check and audit a financial model.
Review Valuation Concepts
- Discuss various valuation methodologies and the appropriateness of using a discounted cash flow methodology to value a business
- Use two common styles to create a DCF analysis
- Discuss various methodologies to value the terminal period
Incorporate a DCF Analysis
- Properly calculate a company’s levered or unlevered free cash flows
- Build a terminal year in the model to create a steady-state perpetual cash flow Review critical terminal year assumptions including Capex, depreciation, working capital, margins and income taxes
- Calculate the tax impact of unlevering a company’s cash flows
- Calculate the company’s cost of capital and choose an appropriate weighted average cost of capital (WACC) range
- Discount the cash flows in the forecast period and ensure that the cash flows are discounted to the correct period
- Discuss common discounting errors and review the magnitude of discounting the cash flows to the wrong time period
Understand the DCF Analysis
- Use a number of powerful Excel tools to sensitize the outputs
- Incorporate appropriate ratios and performance metrics
- Create “flags” to warn the user if a covenant has been tripped
- Conditionally format output tables to highlight specific results
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