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Complete DCF Model Guide for Valuation

The document provides a comprehensive guide to constructing a Discounted Cash Flow (DCF) valuation model, detailing key assumptions, projection logic, and free cash flow calculations. It outlines a five-year projection and explains how to calculate enterprise value using discounted cash flows and terminal value. This DCF structure is widely utilized in investment banking, private equity, and venture capital for company valuation.

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6 views1 page

Complete DCF Model Guide for Valuation

The document provides a comprehensive guide to constructing a Discounted Cash Flow (DCF) valuation model, detailing key assumptions, projection logic, and free cash flow calculations. It outlines a five-year projection and explains how to calculate enterprise value using discounted cash flows and terminal value. This DCF structure is widely utilized in investment banking, private equity, and venture capital for company valuation.

Uploaded by

subhankarsingh827
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Complete DCF Model – Explanation & Structure

This PDF explains a full Discounted Cash Flow (DCF) valuation model step-by-step. You can
directly replicate this structure in Excel for company valuation (IB, PE, VC use).

1. Key Assumptions
Revenue (Year 1) 1000
Revenue Growth 10%
EBITDA Margin 25%
Depreciation (% Revenue) 5%
Tax Rate 25%
Capex (% Revenue) 6%
Working Capital (% Revenue) 2%
WACC 10%
Terminal Growth 4%

2. Projection Logic (5 Years)


Revenue is grown annually using the growth rate. EBITDA is calculated using margin. EBIT =
EBITDA – Depreciation. Taxes applied to EBIT to calculate NOPAT.

3. Free Cash Flow (FCFF)


FCFF = NOPAT + Depreciation – Capex – Change in Working Capital.

4. Valuation
Each year’s FCFF is discounted using WACC. Terminal Value is calculated using Gordon Growth
formula: TV = FCFF■ × (1 + g) / (WACC – g). Enterprise Value = PV of FCFF + PV of Terminal
Value.

This is a standard investment-banking-grade DCF structure used globally.

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