Search results “Valuation discounted cash flow analysis”

Every investor should have a basic grasp of the discounted cash flow (DCF) technique. Here, Tim Bennett introduces the concept, and explains how it can be applied to valuing a company.

Views: 439197
MoneyWeek

In this vide, I discuss the Discounted Cash Flow, or DCF, Model as an approach to estimating the intrinsic value of a company's stock. I review the theoretical motivation behind the model and discuss the model's required inputs, assumptions, and forecasts. I walk through building a basic implementation of the DCF model in Microsoft Excel.
Part 2 of the video (http://youtu.be/ijpPg8eAhv4) shows the application of the basic Excel DCF model to a real firm, including illustrations of where to find data to support the inputs, assumptions, and forecasts.
The music is "Gnomone a Piacere" by MAT64 (http://www.mat64.org/).

Views: 160169
Jason Greene

Here's a quick overview on Valuation. We also construct an entire discounted cash flow analysis on WalMart in conjunction with my book Financial Modeling and Valuation: A Practical Guide to Investment Banking and Private Equity
http://www.amazon.com/Financial-Modeling-Valuation-Practical-Investment/dp/1118558766/ref=sr_1_8?ie=UTF8&qid=1422553204&sr=8-8&keywords=valuation

Views: 82546
Paul Pignataro

Excel Sheet - http://destyy.com/wKaYFe
Data Link - https://www.morningstar.in
** This excel sheet is a property TradeTitan and should not be Sold or Distributed by individuals or Third Party Content Creators **
Our Latest Videos -
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HEG Vs SUZLON - https://youtu.be/11TZ65lSiHs
NIFTY Valuation - https://youtu.be/jC2wnT0rNfw
This is the 12th Lesson, on DCF ( Discounted Cash Flow) Valuation Model. This video teaches you how to calculate stock Target Price and Entry Price using the Net Profit of a company.
( ** This Video is Strictly for Educational purposes, and the contents of this video is to help you learn better in terms of Stock investing. None of the Stocks mentioned in this Video are Recommendations to BUY or SELL. These are mere examples so that you can learn better. **)

Views: 5651
TradeTitan

We have created a new and updated version of this video, which can be found here: https://www.youtube.com/watch?v=-LVZaBBAsiM

Views: 86443
AssistKD

Learn the building blocks of a simple one-page discounted cash flow (DCF) model consistent with the best practices you would find in investment banking. If you are preparing for investment banking interviews, know that the DCF is the source of a TON of investment banking interview questions.
To download the backup Excel file, go to www.wallstreetprep.com/blog/financial-modeling-quick-lesson-building-a-discounted-cash-flow-dcf-model-part-1/
The DCF modeled here is a simplified version of a fully-integrated DCF model. For a deeper dive into DCF modeling in Excel, please visit www.wallstreetprep.com.

Views: 340666
Wall Street Prep

For details, visit: http://www.financewalk.com
DCF, Discounted Cash Flow Valuation in Excel Video
Discounted Cash Flow (DCF) Valuation
DCF valuation can be defined as:
"A valuation method used to estimate the attractiveness of an investment opportunity. Discounted cash flow (DCF) analysis uses future free cash flow projections and discounts them (most often using the weighted average cost of capital-which reflects the riskiness of the cash flows) to arrive at a present value, which is used to evaluate the potential for investment. If the value arrived at through DCF analysis is higher than the current cost of the investment, the opportunity may be a good one."
DCF valuation comes handy when there are no comparable companies available in the market.
DCF involves some steps which takes into account firm's capital structure, inflation rate, growth of the economy, growth of the company, riskiness of the project, working capital management, capital expenditure required in future years etc.
Inputs to Discounted Cash Flow Models
• Discount Rates -- Cost of Debt+Cost of Equity
• Expected Cash Flows -- FCFF , FCFE , Dividends
• Expected Growth Rate
Steps in DCF
Step 1 -- Forecast/Measure Free Cash Flow
Step 2 -- Estimate WACC/Cost of Equity
Step 3 -- Use WACC to discount FCF
Step 4 -- Estimate Terminal (Residual) Value
Step 5 -- Use WACC to discount Terminal Value
Step 6 - Estimate Total Present Value of FCF
Step 7 -- Add value of Non-operating Assets
Step 8 -- Subtract value of Liabilities assumed
Step 9 -- Calculate Value of Common stock

Views: 152993
Avadhut Nigudkar

Look at the estimation process and challenges associated with estimating cash flows & discount rates in valuation

Views: 11931
Aswath Damodaran

DCF is considered by many investors to be the king of
valuation methods. It's also the most complicated.
Here Tim Bennett introduces the technique and
explains how to use it.
Don't miss out on Tim Bennett's video tutorials --
get the latest video sent straight to your inbox each
week, before it's released on YouTub

Views: 6037
AIUEOMEDIA

Learn more about Preston’s Intrinsic Value Course that teaches you step-by-step how to calculate the intrinsic value of a stock in 18 exclusive videos: https://www.theinvestorspodcast.com/product/intrinsic-value-course/
Watch my other investing courses:
https://www.theinvestorspodcast.com/tip-academy/#tipcourses
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Preston Pysh is the #1 selling Amazon author of two books on Warren Buffett. The books can be found at the following location:
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Use the intrinsic Value Calculator at:
http://www.buffettsbooks.com/security-analysis/intrinsic-value-calculator-dcf.html
Value stocks with the Discount Cash Flow Intrinsic Value Calculator

Views: 87379
Preston Pysh

dcf website link :- http://tradingchanakya.com/dcf-calculator/
hello friends today's video concept is what is a dcf valuation and how to calculated fair value in 2 min with dcf calculator

Views: 13333
Trading Chanakya

In class today we went through a DCF case study example. This was similar to a portion of a bulge bracket bank final round case one of our past students had provided for us. My fourth book coming out this month will be pages of similar case studies increasing in difficulty to best prepare a candidate for investment banking interviews.
https://www.amazon.com/Technical-Interview-Investment-Banking-Website/dp/1119161398/ref=sr_1_4?ie=UTF8&qid=1486645420&sr=8-4&keywords=pignataro

Views: 9812
Paul Pignataro

This video follows Part 1 (available here: http://youtu.be/77ivvN2Uk28), which reviewed the basics of a DCF Model, including how to program a basic model in an Excel spreadsheet. This video illustrates a Discounted Cash Flow Model applied to a real firm. In particular, I discuss the various sources that help inform the inputs, assumptions, and forecasts for the DCF model, including freely available sources on the web, as well as Bloomberg Professional.
Disclaimer: This video is for educational purposes only. It is not investment advice. It is not intended to recommend either positively or negatively the company that is used in the illustrative example.
The music is "Gnomone a Piacere" by MAT64 (http://www.mat64.org/).

Views: 84870
Jason Greene

Why the Dividend Discount Model (DDM) is used to value commercial banks instead of the traditional Discounted Cash Flow (DCF) analysis.
By http://breakingintowallstreet.com/ "Financial Modeling Training And Career Resources For Aspiring Investment Bankers"
There are 3 main reasons why the DCF and the concept of Free Cash Flow (FCF) do not apply to commercial banks:
1. You can't separate operating vs. investing vs. financing activities - the lines are very blurry for a bank, since items like debt are more operationally-related and fund the bank's lending activities.
2. CapEx doesn't represent re-investment in the business, as it does for a normal company - for a bank,"re-investment" means hiring people, doing more lending, etc.
3. Working Capital represents something much different for a bank - the standard definition of Current Assets Excl. Cash Minus Current Liabilities Excl. Debt makes no sense, because for banks that includes tons of investments, securities, other borrowings, etc. so you could see massive swings...
What You Do Instead - Use Dividends as a Proxy for Free Cash Flow
Why? Because banks are CONSTRAINED by capital requirements - according to the Basel accords (I, II, III), they must maintain a certain "buffer" at all times to cover unexpected losses on their loans...
So just like CapEx requirements, Net Income growth, and Working Capital constrain FCF for normal companies, the Tier 1 Capital / Tangible Common Equity / Total Capital requirements constrain dividends for banks.
So we'll project a bank's regulatory capital, its asset growth, and its net income, and use those to project its dividends - then, discount, and sum up the dividends and discount and add the NPV of its terminal value.
How to Set Up a Dividend Discount Model (DDM)
1. Make assumptions for Total Assets, Asset Growth, targeted Tier 1 (or other) Ratios, Risk-Weighted Assets, Return on Assets (ROA) or Return on Equity (ROE), and Cost of Equity.
2. Next, project Assets and Risk-Weighted Assets.
3. Then, project Net Income based on ROA or ROE.
4. Then, project Shareholders' Equity (AKA Tier 1 Capital) based on targeted capital ratio...
5. And BACK INTO dividends! Different from a normal company's DDM!
Set dividends such that the minimum capital ratio is maintained, based on starting Shareholders' Equity and Net Income that year.
6. Flesh out the rest of the model - stats, growth rates, other metrics.
7. Discount and sum up dividends.
8. Calculate, discount, and add Terminal Value so that NPV = NPV of Terminal Value + NPV of All Dividends.
9. Calculate the Implied Share Price and compare to actual Share Price.
Is the bank undervalued? Overvalued? What are the clues so far?
What Next?
Try it with a real company, using its historical financial information.
Add more complex / realistic assumptions, based on industry research, channel checks, the bank's own strengths/weaknesses, etc.
Add more advanced features - other ways to calculate Terminal Value, more accurate regulatory capital, mid-year discount and/or stub periods, stock issuances / repurchases, multiple growth stages, and so on.

Views: 38096
Mergers & Inquisitions / Breaking Into Wall Street

Discounted Cash Flow (DCF) Formula - Tutorial | Corporate FInance Institute
This tutorial is from our course "Introduction to Corporate Finance." Enroll in the full course to upgrade your skills: https://courses.corporatefinanceinstitute.com/courses/introduction-to-corporate-finance
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Views: 29147
Corporate Finance Institute

This video explains how to use the Discounted Cash Flow Model to value a firm. Whereas the Dividend Discount Model values the firm based on future dividends and the Total Payout Model values the firm based on dividends and share repurchases, the Discounted Cash Flow Model values a firm without having to consider dividends, repurchases, or the firm's use of debt. This video provides a comprehensive example to illustrate how the DCF model is used to come up with a valuation.
Edspira is your source for business and financial education. To view the entire video library for free, visit http://www.Edspira.com
To like us on Facebook, visit https://www.facebook.com/Edspira
Edspira is the creation of Michael McLaughlin, who went from teenage homelessness to a PhD. The goal of Michael's life is to increase access to education so all people can achieve their dreams. To learn more about Michael's story, visit http://www.MichaelMcLaughlin.com
To follow Michael on Facebook, visit
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To follow Michael on Twitter, visit
https://twitter.com/Prof_McLaughlin

Views: 20194
Edspira

DCF Valuation Model- FCFF and FCFE by Ibinstitute

Views: 6318
IB Institute

An overview of what Discounted Cash Flow is, how to work it out and how it can be used by organisations.

Views: 2010
AssistKD

The discount cash flow analysis (DCF) is a fundamental valuation methodology broadly used by investment bankers, corporate officers, and other finance professionals. It is based on the principal that the value of a company can be derived from the PV of its projected free cash flow (FCF).
While many videos cover the actual framework and how to build the excel model, the assumptions and thinking behind the model are often left to more “real world” examples. This is that example!
Chapter 3 covered topics like;
- How do you project revenues for a DCF model?
- How many years do you project cashflows for?
- What is the exit multiple method?
- What is the perpetuity growth method?
- How do you project EBITDA for a DCF model?
- How do you project EBIT for a DCF model?
- How do you project the NWC for a DCF model?
- What is the mid-year convention?
- How do you calculate unlevered free cash flow?
For those who are interested in buying the Investment Banking: Valuation, Leveraged Buyouts, and Mergers and Acquisitions by Joshua Rosenbaum and Joshua Pearl, follow the Amazon link below;
https://www.amazon.ca/Investment-Banking-Valuation-Leveraged-Acquisitions/dp/1118656210
If you have any other questions, please comment below. If you enjoyed the video and found it helpful, please like and subscribe to FinanceKid for more videos soon!
For those who may be interested in finance and investing, I suggest you check out my Seeking Alpha profile where I write about the market and different investment opportunities. I conduct a full analysis on companies and countries while also commenting on relevant news stories.
http://seekingalpha.com/author/robert-bezede/articles#regular_articles
Videos referenced;
Estimating Cost of Debt For WACC:
https://www.youtube.com/watch?v=CSkPlxEe-dY
Estimating Cost Of Equity For WACC:
https://www.youtube.com/watch?v=ZigyWoDAMrE
Projecting NWC;
https://www.youtube.com/watch?v=2E1Hca2dVbI
Why Is Your DCF Model Incorrect?
https://www.youtube.com/watch?v=ByyK0AMuLxc

Views: 5775
FinanceKid

Basics of Discounted Cash Flow (DCF) Analysis to value Stocks
Online DCF Calculator: https://www.tradebrains.in/dcf-calculator/
Course:
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Discounted cash flow (DCF) analysis is a method of valuing a company using the concepts of the time value of money. All future cash flows are estimated and discounted by using the cost of capital to give their present values.
DCF is a very powerful tool for valuing stocks. However, this methodology is only as good as the inputs.
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Tags: DCF Analysis Basics, DCF Analysis Indian stocks, Discounted cashflow analysis, DCF Analysis Indian companies, Discounted cash flow model, DCF model bse stocks, DCF model basics, how to value stocks using DCF

Views: 107
Trade Brains

Learn Financial Modelling taught by Investment Bankers from Goldman Sachs, Merrill Lynch and CSFB at DeZyre. Click here to know more details http://www.dezyre.com/Financial-Modelling/1
This video teaches you how to use the DCF / Discounted Cash Flow valuation method to value companies. The most popular valuation metric used by all financial analysts and investment bankers. Understand how to quantify a companies future cash flows and how to arrive at a per share equity value based on future cash flow projections. Also learn how to step by step calculate Free Cahs Flow using MS Excel.

Views: 75149
BusinessFinance

DCF model for fair value calculation, How to calculate any stock fair value, intrinsic value of any stock, how to calculate intrinsic value, DCF(discounted cash flow method), DCF method in hindi, stock valuation methods, stock valuation method - DCF method
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Views: 15631
MILAN PATEL

In this WACC and Cost of Equity tutorial, you'll learn how changes to assumptions in a DCF impact variables like the Cost of Equity, Cost of Debt.
By http://breakingintowallstreet.com/ "Financial Modeling Training And Career Resources For Aspiring Investment Bankers"
You'll also learn about WACC (Weighted Average Cost of Capital) - and why it is not always so straightforward to answer these questions in interviews.
Table of Contents:
2:22 Why Everything is Interrelated
4:22 Summary of Factors That Impact a DCF
6:37 Changes to Debt Percentages in the Capital Structure
11:38 The Risk-Free Rate, Equity Risk Premium, and Beta
12:49 The Tax Rate
14:55 Recap and Summary
Why Do WACC, the Cost of Equity, and the Cost of Debt Matter?
This is a VERY common interview question:
"If a company goes from 10% debt to 30% debt, does its WACC increase or decrease?"
"What if the Risk-Free Rate changes? How is everything else impacted?"
"What if the company is bigger / smaller?"
Plus, you need to use these concepts on the job all the time when valuing companies… these "costs" represent your
opportunity cost from investing in a specific company, and you use them to evaluate that company's cash flows and determine
how much the company is worth to you.
EX: If you can get a 10% yield by investing in other, similar companies in this market, you'd evaluate this company's cash flows against that 10% "discount rate"…
…and if this company's debt, tax rate, or overall size changes, you better know how the discount rate also changes! It could easily change the company's value to you, the investor.
The Most Important Concept…
Everything is interrelated - in other words, more debt will impact BOTH the equity AND the debt investors!
Why?
Because additional leverage makes the company riskier for everyone involved. The chance of bankruptcy is higher, so the "cost" even to the equity investors increases.
AND: Other variables like the Risk-Free Rate will end up impacting everything, including Cost of Equity and Cost of Debt, because both of them are tied to overall interest rates on "safe" government bonds.
Tricky: Some changes only make an impact when a company actually has debt (changes to the tax rate), and you can't always predict how the value derived from a DCF will change in response to this.
Changes to the DCF Analysis and the Impact on Cost of Equity, Cost of Debt, WACC, and Implied Value:
Smaller Company:
Cost of Debt, Equity, and WACC are all higher.
Bigger Company:
Cost of Debt, Equity, and WACC are all lower.
* Assuming the same capital structure percentages - if the capital structure is NOT the same, this could go either way.
Emerging Market:
Cost of Debt, Equity, and WACC are all higher.
No Debt to Some Debt:
Cost of Equity and Cost of Debt are higher. WACC is lower at first, but eventually higher.
Some Debt to No Debt:
Cost of Equity and Cost of Debt are lower. It's impossible to say how WACC changes because it depends on where you are in the "U-shaped curve" - if you're above the debt % that minimizes WACC, WACC will decrease.
Otherwise, if you're at that minimum or below it, WACC will increase.
Higher Risk-Free Rate:
Cost of Equity, Debt, and WACC are all higher; they're all lower with a lower Risk-Free Rate.
Higher Equity Risk Premium and Higher Beta:
Cost of Equity is higher, and so is WACC; Cost of Debt doesn't change in a predictable way in response to these.
When these are lower, Cost of Equity and WACC are both lower.
Higher Tax Rate:
Cost of Equity, Debt, and WACC are all lower; they're higher when the tax rate is lower.
** Assumes the company has debt - if it does not, taxes don't make an impact because there is no tax benefit to interest paid on debt.

Views: 103136
Mergers & Inquisitions / Breaking Into Wall Street

Here's a quick tutorial explaining how to calculate free cash flow (fcf) in a company valuation.
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Views: 314
Rask Finance

The Discounted Cash Flow DCF Analysis is one of the most widely used methods of valuing a company. Equity analysts and investment bankers around the world use the Discounted Cash Flow analysis to find the intrinsic value of a stock. This Bloomberg Tutorial will show you how to use the discounted cash flow DCF function in Bloomberg and how to download and use the Excel Discounted Cash Flow template provided by Bloomberg. If you are new to financial modeling you should start by learning a basic Discounted Cash Flow model and build from there.

Views: 23294
Fintute

Introduction to Valuation Methods - DCF, public comparables, precedent transaction analysis
Part of Finance and Investment Banking crash course
Additional courses coming on:
-discounted cash flow DCF analysis
-public comparable company analysis
-precedent transaction analysis
-LBO analysis (based on demand)
Actuarial Science resume advice:
http://www.actuarialninja.com/
Random news website:
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Views: 2580
Mifan Films

This video introduces the discounted cash flow (DCF) model. The model is very basic, but provides a platform to introduce the components. (www.ASimpleModel.com)

Views: 38958
A Simple Model

In this tutorial, you'll learn how private companies are valued differently from public companies, including differences in the financial statements, the public comps, the precedent transactions, and the DCF analysis and WACC.
Get all the files and the textual description and explanation here:
http://www.mergersandinquisitions.com/private-company-valuation/
Table of Contents:
1:29 The Three Types of Private Companies and the Main Differences
6:22 Accounting and 3-Statement Differences
12:04 Valuation Differences
16:14 DCF and WACC Differences
21:09 Recap and Summary
The Three Type of Private Companies
To master this topic, you need to understand that "private companies" are very different, even though they're in the same basic category.
There are three main types worth analyzing:
Money Businesses: These are true small businesses, owned by families or individuals, with no aspirations of becoming huge. They are often heavily dependent on one person or several individuals.
Examples include restaurants, law firms, and even this BIWS/M&I business.
Meth Businesses: These are venture-backed startups aiming to disrupt big markets and eventually become huge companies.
Examples include Kakao, WhatsApp, Instagram, and Tumblr – all before they were acquired.
Empire Businesses: These are large companies with management teams and Boards of Directors; they could be public but have chosen not to be.
Examples include Ikea, Cargill, SAS, and Koch Industries.
You see the most differences with Money Businesses and much smaller differences with the other two categories. The main differences have to do with accounting and the three financial statements, valuation, and the DCF analysis.
Accounting and 3-Statement Differences
Key adjustments might include "normalizing" the company's financial statements to make them compliant with US GAAP or IFRS, classifying the owner's dividends as a compensation expense on the Income Statement, removing intermingled personal expenses, and adjusting the tax rate in future periods.
These points should NOT be issues with Meth Businesses (startups) or Empire Businesses (large private companies) unless the company is another Enron.
Valuation Differences
The valuation of a private company depends heavily on its purpose: are you valuing the company right before an IPO? Or evaluating it for an acquisition by an individual or private/public buyer?
These companies might be worth very different amounts to different parties – they *should* be worth the most in IPO scenarios because private companies gain a larger, diverse shareholder base like that.
You'll almost always apply an "illiquidity discount" or "private company discount" to the multiples from the public comps; a 10x EBITDA multiple is great, but it doesn't hold up so well if the comps have $500 million in revenue and your company has $500,000 in revenue.
This discount might range from 10% to 30% or more, depending on the size and scale of the company you're valuing.
Precedent Transactions tend to be more similar, and you don't apply the same type of huge discount there for larger private companies.
You may see more "creative" metrics used, such as Enterprise Value / Monthly Active Users, especially for private mobile/gaming/social companies.
DCF and WACC Differences
The biggest problems here are the Discount Rate and the Terminal Value.
The Discount Rate has to be higher for private companies, but you can't calculate it in the traditional way because private companies
don't have Betas or Market Caps.
Instead, you often use the industry-average capital structure or average from the comparables to determine the appropriate percentages, and then calculate Beta, Cost of Equity, and WACC based on that.
There are other approaches as well – use the firm's optimal capital structure, create a giant circular reference, or use earnings volatility or dividend growth rates – but this is the most realistic one.
You use this approach for all private companies because they all have the same problem (no Market Cap or Beta).
You'll also have to discount the Terminal Value, but this is mostly an issue for Money Businesses because of their dependency on the owner and key individuals.
You could heavily discount the Terminal Value, use the company's future Liquidation Value AS the Terminal Value, or assume the company stops operating in the future and skip Terminal Value entirely.
Regardless of which one you use, Terminal Value will be substantially lower for this type of company.
The result is that the valuation will be MOST different for a Money Business, with smaller, but still possibly substantial, differences for Meth Businesses and Empire Businesses.
http://www.mergersandinquisitions.com/private-company-valuation/

Views: 74868
Mergers & Inquisitions / Breaking Into Wall Street

Explained simply, the discounted cash flow is the sum of the cash flows discounted to their present value. Remember, the discounted cash flow does not have the initial investment.
Blog post (For excel sheet):
http://www.cheaphouseswilmington.com/realestate-dcf-excel/
Connect on Linkedin:
https://www.linkedin.com/in/teddysmithnc
Download my FREE spreadsheet:
http://www.cheaphouseswilmington.com/free-real-estate-investment-calculator-spreadsheet/
Follow me on Twitter:
https://twitter.com/cheaphouseswilm

Views: 9906
Teddy Smith

Download Excel workbook http://people.highline.edu/mgirvin/ExcelIsFun.htm
Learn how to do Asset Valuation Using Discounted Cash Flow Analysis PV Function.

Views: 23845
ExcelIsFun

We review the *intuition* behind the Gordon Growth Formula used to calculate Terminal Value in a Discounted Cash Flow (DCF) analysis.
By http://breakingintowallstreet.com/ "Financial Modeling Training And Career Resources For Aspiring Investment Bankers"
Lots of people, textbooks, training programs, professors, and so on present this formula, but hardly anyone takes the time to explain what it means, where it comes from, and how it works.
We'll explain here both the INTUITION behind the formula, and
then also give a mathematical derivation for it, based on the
sum of a geometric series.
If you like math, you'll really like that part!
Here's the Table of Contents for the lesson:
1:12 Gordon Growth Method Intuition
2:37 The Intuition -- No Growth in Cash Flows
7:46 The Intuition -- Growth in Cash Flows
15:23 The Algebra Behind Gordon Growth
17:40 The Common Ratio
18:41 The Algebra: Putting It All Together
22:49 Gordon Growth Method Summary
Gordon Growth Method Intuition
The basic intuition here is that we can pay:
Annual Free Cash Flow / Discount Rate
For an investment, if the cash flow stays the same
each year and we're targeting a specific yield on
our investment (known as the "discount rate" in a DCF).
Why?
Think about if you could make an investment that earned
$100 in cash flows each year.
You're targeting a 10% yield on your investment.
How much could you pay for it?
$1,000, because $1,000 * 10% = $100 in cash flows each year.
You can use the NPV function in Excel with $100 in cash flow
each year (e.g., =NPV(10%, Long series of $100 you've entered in
consecutive cells)) to verify this.
The NPV, or "net present value," IS this number - what we could
afford to pay for a series of cash flows at a given yield we're
targeting.
The Intuition -- Growth in Cash Flows
This works fine if there's no growth and the cash flows stay
the same each year, but what if they're growing?
Well, in that case we can afford to pay MORE than that $1,000 and
still get the same 10% yield... because there's growth!
Specifically, we can now pay:
First Year Free Cash Flow / (Discount Rate - FCF Growth Rate)
for this investment.
In the Terminal Value calculation, that "First Year Free Cash Flow" is written
as Final Year Projected Free Cash Flow * (1 + FCF Growth Rate)...
...because we're going one year BEYOND the end of our projection period in
the model.
By *subtracting* the growth rate in the denominator, we make the
denominator smaller... which makes the amount we can pay significantly
bigger.
If cash flows grow more quickly, the denominator gets even smaller and
the entire number gets even bigger.
If cash flows grow more slowly, the denominator gets bigger and the entire
number gets smaller.
Let's say the cash flows start at $100 and grow by 3% per year.
We're targeting a discount rate of 10%.
The NPV here would be $1,429, or $100 / (10% - 3%).
Why does this work?
Why can we pay $1,429 and still get that 10% yield?
Think about it like this...
The yield in Year 1 is is $100 / $1429, or 7.0%
But then by Year 5, it's $113 / $1429, or 7.9%.
And then as you keep going, the Yield gets higher and higher...
because we have growth.
By Year 20, it's $175 / $1429, or 12.3%.
So, over all those years into the future, the average comes out
to 10%... because it's LESS than 10% in the early years and greater
than 10% much later on.
So the weighted average, factoring in the time value of money, still
comes out to that 10% yield we were targeting.
The Algebra Behind Gordon Growth
Please see the video for this part - it's almost impossible to explain
in text form, and it would be too long to post in the YouTube description.
Gordon Growth Method Summary
We care about this because everyone uses this formula to calculate
Terminal Value in a DCF, but hardly anyone explains where it comes from.
The basic idea is that you can pay more for a company that's growing its
cash flows than for one that's NOT growing its cash flows.
And to represent that, you use the formula:
Final Year, Projected Period Free Cash Flow * (1 + FCF Growth Rate) / (Discount Rate - FCF Growth Rate)
To approximate the amount you could pay for the Free Cash Flows in
the Terminal Period - which is the Terminal Value in a DCF.

Views: 44256
Mergers & Inquisitions / Breaking Into Wall Street

Lets change the discount rates depending on how far out the payments are. Created by Sal Khan.
Watch the next lesson:
https://www.khanacademy.org/economics-finance-domain/core-finance/interest-tutorial/personal-bankruptcy-tut/v/personal-bankruptcy-chapters-7-and-13?utm_source=YT&utm_medium=Desc&utm_campaign=financeandcapitalmarkets
Missed the previous lesson? Watch here: https://www.khanacademy.org/economics-finance-domain/core-finance/interest-tutorial/present-value/v/present-value-3?utm_source=YT&utm_medium=Desc&utm_campaign=financeandcapitalmarkets
Finance and capital markets on Khan Academy: If you gladly pay for a hamburger on Tuesday for a hamburger today, is it equivalent to paying for it today? A reasonable argument can be made that most everything in finance really boils down to "present value". So pay attention to this tutorial.
About Khan Academy: Khan Academy offers practice exercises, instructional videos, and a personalized learning dashboard that empower learners to study at their own pace in and outside of the classroom. We tackle math, science, computer programming, history, art history, economics, and more. Our math missions guide learners from kindergarten to calculus using state-of-the-art, adaptive technology that identifies strengths and learning gaps. We've also partnered with institutions like NASA, The Museum of Modern Art, The California Academy of Sciences, and MIT to offer specialized content.
For free. For everyone. Forever. #YouCanLearnAnything
Subscribe to Khan Academy’s Finance and Capital Markets channel: https://www.youtube.com/channel/UCQ1Rt02HirUvBK2D2-ZO_2g?sub_confirmation=1
Subscribe to Khan Academy: https://www.youtube.com/subscription_center?add_user=khanacademy

Views: 320740
Khan Academy

A basic real estate valuation model for office, retail, or industrial deals built in Microsoft Excel. The model includes a simple DCF module to calculate cash flows over the hold period, as well as an equity waterfall module for calculating partnership returns.
You can download the model for free here: http://www.adventuresincre.com/real-estate-acquisition-model-for-office-retail-or-industrial-properties
If you have any questions or comments, feel free to contact the author, Spencer Burton, at http://www.spencerburton.org

Views: 36308
Spencer Burton

You'll learn what "Free Cash Flow" (FCF) means, why it's such an important metric when analyzing and valuing companies.
By http://breakingintowallstreet.com/ "Financial Modeling Training And Career Resources For Aspiring Investment Bankers"
You'll also learn how to interpret positive vs. negative FCF, and what different numbers over time mean -- using a comparison between Wal-Mart, Amazon, and Salesforce as our example.
Table of Contents:
0:54 What Free Cash Flow (FCF) is and Why It's Important
2:26 What Positive FCF Tells You, and What to Do With It
3:56 What Negative FCF Tells You, and What to Do With It
4:38 Why You Exclude Most Investing and Financing Activities in the FCF Calculation
7:55 How to Use and Interpret FCF When Analyzing Companies
11:58 Wal-Mart vs. Amazon vs. Salesforce: Free Cash Flow Across Sectors
19:33 Recap and Summary
What is Free Cash Flow?
Normally it's defined as Cash Flow from Operations minus Capital Expenditures.
Tells you the company's DISCRETIONARY cash flow - after paying for expenses and working capital requirements like inventory and capital expenditures, how much cash flow can it put to use for other purposes?
If the company generates a lot of Free Cash Flow, it has many options:
hire more employees, spend more on working capital, invest in CapEx, invest in other securities, repay debt, issue dividends or repurchase shares, or even acquire other companies.
If FCF is negative, you need to dig in and see if it's a one-time issue or recurring problem, and then figure out why: Are sales declining? Are expenses too high? Is the company spending too much on CapEx?
If FCF is consistently negative, the company might have to raise debt or equity eventually, or it might have to restructure itself or cut costs in some other way.
Why Do You Exclude Most Investing and Financing Activities Other Than CapEx?
Because all other activities are, for the most part, "optional" and non-recurring.
A normal company does not NEED to buy stocks or issue dividends or repurchase shares... those are all optional uses of cash.
All it NEEDS to do to keep its business running is sell products to customers, pay for expenses, and keep investing in longer-term assets such as buildings and equipment (PP&E).
Debt repayment and interest expense are "borderline" because some variations of Free Cash Flow will include them, others will exclude them, and some will include interest expense but not debt principal repayment.
How Do You Use Free Cash Flow?
It's used in a DCF (or at least, a variation of it) to value a company; it's also used in a leveraged buyout (LBO) model to determine how much debt a company can repay.
And you can calculate it on a standalone basis for use when comparing different companies.
The key is to DIG IN and see why Free Cash Flow is changing the way it is - Organic sales growth? Artificial cost-cutting? Accounting gimmicks? Different working capital policies?
IDEALLY, FCF will be increasing because of higher units sales and/or higher market share, and/or higher margins due to economies of scale.
Less Good: FCF is growing due to cost-cutting, CapEx slashing, or FCF is growing in spite of falling sales and profits... because of a company playing games with Working Capital, non-core activities, or CapEx spending.
Wal-Mart vs. Amazon vs. Salesforce Comparison
Main takeaway here is that Wal-Mart's FCF is all over the place, but Cash Flow from Operations is MOSTLY growing, so that appears to be driven by the also growing organic sales.
The company is doing some odd things with CapEx and Working Capital, which led to fluctuations in FCF - not exactly "bad" or "good," just neutral and requires more research.
With Amazon, they've increased CapEx spending massively in the past 2 years so that has pushed down CapEx. CFO is growing, driven by organic revenue growth (no "games" with Working Capital), but it's very difficult to assess whether all that CapEx spending will pay off in the long-term.
With Salesforce, FCF is definitely growing organically (Revenue growth leads directly to CFO growth, and CapEx varies a bit but not as much as with Amazon), but the company is also spending a ton on acquisitions... will it continue?
If CapEx as a % of revenue stays low, it will most likely continue to spend on acquisitions - unlikely to issue dividends, repurchase shares, etc. since it's a growth company.
Further Resources
http://youtube-breakingintowallstreet-com.s3.amazonaws.com/105-10-Free-Cash-Flow.xlsx
http://youtube-breakingintowallstreet-com.s3.amazonaws.com/105-10-Walmart-Financial-Statements.pdf
http://youtube-breakingintowallstreet-com.s3.amazonaws.com/105-10-Amazon-Financial-Statements.pdf
http://youtube-breakingintowallstreet-com.s3.amazonaws.com/105-10-Salesforce-Financial-Statements.pdf

Views: 128000
Mergers & Inquisitions / Breaking Into Wall Street

FinTree website link: http://www.fintreeindia.com
FB Page link :http://www.facebook.com/Fin...
This series of video covers the following points :
-There are two ways to estimate the equity value using free cash flows.
-An entire firm and all its cash flows (FCFF) are discounted, with the relevant discount rate being the weighted average cost of capital (WACC) because it reflects all the firm’s sources of capital. The value of the firm’s debt is then subtracted to calculate the equity value.
-Only the free cash flows to equity (FCFE) are discounted, with the relevant discount rate being the required return on equity. This provides a more direct way of estimating equity value.
-In theory, both approaches should yield the same equity value if the inputs are consistent. However, the FCFF approach would be favored in two cases.
The firm’s FCFE is negative.
-The firm’s capital structure (mix of debt and equity financing) is unstable. The FCFF approach is favored here because a) the required return on equity used in the FCFE approach will be more volatile when the firm’s financial leverage (use of debt) is unstable and b) when using historical data to estimate free cash flow growth, FCFF growth might reflect the firm’s fundamentals better than FCFE growth, which would fluctuate as debt fluctuates.
-FCFF and FCFE approaches to valuation
-value of a company by using the stable-growth, two-stage, and three-stage FCFF and FCFE models.
-appropriate adjustments to net income, earnings before interest and taxes (EBIT), earnings before interest, taxes, depreciation, and amortization (EBITDA), and cash flow from operations (CFO) to calculate FCFF and FCFE.
-approaches for forecasting FCFF and FCFE.
-approaches for calculating the terminal value in a multistage valuation model
-We love what we do, and we make awesome video lectures for CFA and FRM exams. Our Video Lectures are comprehensive, easy to understand and most importantly, fun to study with!
-This Video lecture was recorded by our popular trainer for CFA, Mr. Utkarsh Jain, during one of his live CFA Level II Classes in Pune (India).

Views: 18970
FinTree

Once you’ve watched the full CH3 video and learned how to build a DCF model, test your knowledge with these 15 questions! I walk through the examples and tie what we learned in the chapter video to these questions. So what did we learn?
- How do you project revenues for a DCF model?
- How many years do you project cashflows for?
- What is the exit multiple method?
- What is the perpetuity growth method?
- How do you project EBITDA for a DCF model?
- How do you project EBIT for a DCF model?
- How do you project the NWC for a DCF model?
- What is the mid-year convention?
- How do you calculate unlevered free cash flow?
For those who are interested in buying the Investment Banking: Valuation, Leveraged Buyouts, and Mergers and Acquisitions by Joshua Rosenbaum and Joshua Pearl, follow the Amazon link below;
https://www.amazon.ca/Investment-Banking-Valuation-Leveraged-Acquisitions/dp/1118656210
If you have any other questions, please comment below. If you enjoyed the video and found it helpful, please like and subscribe to FinanceKid for more videos soon!
For those who may be interested in finance and investing, I suggest you check out my Seeking Alpha profile where I write about the market and different investment opportunities. I conduct a full analysis on companies and countries while also commenting on relevant news stories.
http://seekingalpha.com/author/robert-bezede/articles#regular_articles

Views: 1231
FinanceKid

This is an example of a free cash flow calculation

Views: 28877
Shane Van Dalsem

Discounted Cash Flow Analysis (DCF) requires an investor to estimate future earnings and then discount them at the present value. If current market price is less than that value, it is undervalued and is available at a discount. If the current market price is more than the present value, it is expensive.
This is only what it is to Intrinsic Value Calculation, but it is made so complicated that investors and students get intimidated and always remain away from this simple and powerful topic.
This video makes an attempt to explain this topic in as simple a manner as possible.
Our channel is already 60K+ subscribers one and this number is steadily increasing. Thank you all for supporting and loving us.
To register for our Capital Markets Module kindly visit:
http://www.moneybee.info/moneybee/register.php
or WhatsApp 'MONEYBEE' to 8600043130
Thank you once again :)
P. S. Heavy session.....pakka neend aegi ;)

Views: 40334
Money Bee Institute Pvt. Ltd

My discounted cash flow (DCF) valuation of Netflix, Inc. (NFLX) as of November 22, 2017. Hope you enjoy! Feel free to comment.
Disclaimer: This video is for educational and informational purposes only. The data presented may not be accurate and should not be relied upon to make investment decisions.

Views: 878
Valuing Stocks

You’ll learn about Startup Valuation in this lesson, and see how a traditional methodology such as the Discounted Cash Flow (DCF) analysis applies to early-stage tech startups with no revenue.
http://breakingintowallstreet.com/
"Financial Modeling Training And Career Resources For Aspiring Investment Bankers"
Table of Contents:
2:59 A DCF Analysis for Piped Piper
9:01 What’s Required for a Startup DCF/Valuation to Work
12:35 Recap and Summary
How Are Startups Worth Billions of Dollars?
“I don’t understand how tech startups can be worth billions of dollars – many of them aren’t even making money yet!”
“How can an unprofitable company that isn’t even generating revenue possibly be worth so much? Doesn’t this violate all the principles of valuation?”
We get questions like the ones above all the time. The short answer is NO, startup valuation doesn’t violate all the principles.
You can still use standard methodologies such as the DCF, but you have to use radically different assumptions that make the analysis less grounded in reality.
For the numbers to work, the startup has to start making A LOT of money very quickly in the NEAR FUTURE.
If it takes 10-15 years to generate revenue, it will be almost impossible for the numbers to work; but if it happens in the next 2-3 years, it might be plausible.
As an example, we look at Pied Piper in this lesson, the fictional company from the HBO show “Silicon Valley.”
They make money with a file compression and storage app, and they’re aiming to get hundreds of millions of users and then get a tiny percentage of them using their paid services.
So if they currently generate no revenue and have just received $100 million in funding at a $1 billion valuation, is that crazy?
A DCF for Pied Piper
We assume massive app download growth in the early years, with the company reaching ~500 million annual downloads and ~150 million paid users by the end of Year 10. Revenue goes from 0 to nearly $2 billion over that time frame.
The company goes from negative Operating Income to nearly $500 million (25% margin) and almost $300 million in Free Cash Flow.
We use a 100x EBITDA multiple to calculate the Terminal Value (arguably fair for a $2 billion company growing at nearly 40% per year).
These assumptions are highly speculative, and so we also have to use a much higher Discount Rate: 50%, compared with the standard 8-12% figures you see for mature companies.
As a result of all this, far more value comes from the Present Value of the Terminal Value: 99% here, vs. 50-70% for normal companies (and ideally less than that!).
The whole valuation is dependent on a huge number of assumptions that are impossible to know in advance: Will billions of people download the app? Will ~5% of users convert to paying customers? Will the company be able to monetize in only 2-3 years’ time?
These assumptions might turn out to be true, but there’s a very high chance they might not be – which explains the 50% Discount Rate.
Startup Valuation Myths
So the DCF does “work” for startups; it’s just not that useful because of all the required assumptions and the inability to guesstimate the numbers for a pre-revenue company.
For a valuation to make sense, the company has to start generating money *very quickly* – if it takes ten years for that to happen, the numbers will be even harder to justify.
And since the majority of the implied value comes from the Terminal Value, the Terminal Multiple and Terminal Growth Rate are incredibly important. They matter more than long-term profit margins because almost no value comes from the Present Value of Free Cash Flows.
RESOURCES:
https://youtube-breakingintowallstreet-com.s3.amazonaws.com/107-17-How-Are-Startups-Worth-Billions-Slides.pdf
https://youtube-breakingintowallstreet-com.s3.amazonaws.com/107-17-How-Are-Startups-Worth-Billions.xlsx

Views: 32385
Mergers & Inquisitions / Breaking Into Wall Street

Corporate valuation, CFA exam, MBA course, finance course, use fundamental valuation approach, Forecasting, Cash flow assessment , discounted cash flow, Technical analysis, cash flow valuation model, free cash flow, zero-growth perpetuities, constant-growth perpetuities, price-earnings , earnings multiples, abnormal earnings, ROA, return on assets, ROCE, return on common equity, fair value accounting, net present value of growth opportunities, NPVGO, permanent earnings, transitory earnings, Quality of earnings , earnings management, Sensitivity analysis, cpa exam

Views: 794
Farhat's Accounting Lectures

– Beware: My Terminal Value should be discounted at 4.5 years, not 5.5 years. See comment below for more detail –
In this quick video, I focus on the Excel part of building a DCF model. I am starting from a Capital IQ pull of reported historical data for the company Argan.
45mn to build a quick DCF model.
Mn 1 to 7: Retrieve historical data.
Mn 8 to 9: Derive key operating metrics.
Mn 10 to 19: Estimate forecasts.
Mn 20 to 28: Derive estimated value.
Mn 29 to 45: Various scenarios, sensitivity table and Monte Carlo Analysis.
Disclaimer: This is not investment advice. This document is for information and training purposes only and does not purport to show actual results. It should not be regarded as investment advice or a recommendation regarding any particular security or course of action. Seek a duly licensed professional for investment advice.

Views: 2437
Bocq Advisory

Clicked here http://www.MBAbullshit.com/ and OMG wow! I'm SHOCKED how easy..
Just for instance I possessed a company comprising of a neighborhood store. To put together that center, I invested $1,000 one year ago on apparatus along with other assets. The equipment in addition to other assets have depreciated by 10% in a single year, so now they're valued at only $900 inside the accounting books. In case I was going to make an effort to offer you this company, what amount would an accountant value it? Relatively easy! $900. The cost of the whole set of assets (less liabilities, if any) can give accountants the "book value" of a typical organization, and such is systematically how accountants observe the worth of an enterprise or company. (We employ the use of the word "book" because the worth of the assets are penned within the company's accounting "books.")
http://www.youtube.com/watch?v=6pCXd4i7DM0
However, imagine this unique company is earning a juicy cash income of $2,000 annually. You would be landing a mighty incredible deal in the event I sold it to you for just $900, right? I, on the flip side, might be taking out a pretty sour pact in the event I offered it to you for just $900, on the grounds that as a result I will take $900 but I will shed $2,000 per annum! Due to this, business directors (dissimilar to accountants), don't make use of merely a company's book value when assessing the value of an organization.So how do they see how much it really is worth? To replace utilizing a business' books or even net worth (the market price of the firm's assets minus the business enterprise's liabilities), financial managers opt to source enterprise worth on how much money it gets in relation to cash flow (real cash acquired... contrary to only "net income" that may not generally be in the format of cash). Basically, a company making $1,000 "free cash flow" monthly having assets worth a very small $1 would remain to be worth a great deal more versus a larger company with substantial assets of $500 in the event the humongous company is attaining only $1 yearly.So far, how do we achieve the exact value of your business? The simplest way would be to mainly look for the net present value of the total amount of long run "free cash flows" (cash inflow less cash outflow).Needless to say, you will come across much more sophisticated formulas to find the value of a company (which you wouldn't genuinely need to learn in detail, since there are numerous gratis calculators on the web), but practically all of such formulas are in a way driven by net present value of cash flows, plus they are likely to take into consideration a few factors for example growth level, intrinsic risk of the company, plus others.

Views: 293120
MBAbullshitDotCom

Watch the next finance lesson: https://bluebookacademy.com/courses

Views: 6398
BlueBookAcademy.com

Terminal value is the estimated value of a business beyond the explicit forecast period. It is a critical part of the financial model as it typically makes up a large percentage of the total value of a business.
Click here to learn more about this topic: https://corporatefinanceinstitute.com/resources/knowledge/valuation/terminal-value/
Check out this resource on DCF Terminal Value Formula: https://corporatefinanceinstitute.com/resources/knowledge/modeling/dcf-terminal-value-formula/

Views: 10854
Corporate Finance Institute

DCF Valuation Introduction Tutorial by Ibinstitute

Views: 8291
IB Institute

on 06.04.2016 by CA. Amith Raj A.N

Views: 2521
Blr icai

In this video, I demonstrate how to create a financial statement forecast, value a firm from that forecast, and create a statement of cash flows from the forecast

Views: 11050
Shane Van Dalsem

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© 2018 Quotations on life pictures

Selling in special circumstances. shares you bought at different times and prices in one company shares through an investment club shares after a company merger or takeover employee share scheme shares. Jointly owned shares and investments. If you sell shares or investments that you own jointly with other people, work out the gain for the portion that you own, instead of the whole value. There are different rules for investment clubs. What to do next. Deduct costs. Apply reliefs.