Discounted Cash Flow Model, or popularly known as the DCF Model, is one of the more widely used equity valuation models in the investment industry. The underlying principle behind the DCF valuation model is that a business is worth the present value of its expected future cash flows.
Valuation is both an art and a science. The purpose of the template is to facilitate the user to consider multiple ways to value a business in order to triangulate a reasonable valuation. Don't know much about valuation? Don't worry, this template will guide you through all the factors to consider - just enter your assumptions into the yellow cells and the model will do the rest.
Outputs – contains a summary of valuation results including transaction/M&A (mergers and acquisitions) comparables, Listed company comparables, Net present value, Gordon’s growth model and Balance Sheet valuations. Valuations consider both historical and forecast data as well as demonstrating the valuation in using both annual or monthly data. Also contains a summary of average assumptions for each valuation type. There is also an output that triangulates an average of all methodologies used.
Assumptions – In general settings set up the valuation template by entering the name, units, model timeline start date and forecast date. Tick the boxes to determine which valuation methodologies to consider. We recommend using as many as possible. In 1.2 enter your P&L and Balance Sheet data. You can select to enter both historical and forecast data, and also choose to enter data annually, monthly, or both (as determined by your settings in 1.1). 1.3 enter your comparable transaction data that relates to the company you’re valuing. 1.4 enter your comparable listed company data. We also recommend applying a liquidity discount as your company will likely be privately owned.