Discounted Cash Flows Model (DCF)

Discounted Cash Flows Model (DCF)

The Discounted Cash Flows Model (DCF) builds on the 3 Statement model by adding a business valuation component for investment through the Discounted Cash Flows method. The Discounted Cash Flows Model links the Income Statement, Balance Sheet, and Cash Flow Statement together dynamically along with a DCF Valuation. Included in the template you will find:

• The Income Statement, Balance Sheet and Cash Flow Statement
• An Assumptions Section with key drivers for the business and a Scenario Analysis with 3 scenarios
• Supporting Schedules Section for PPE, Working Capital, and Long-Term Debt
• Discounted Cash Flows Valuation
• Graphs to visually display the Free Cash Flow and Intrinsic vs. Market Value

In the Discounted Cash Flows Model. first is the Assumptions sections where Assumptions are entered in the cells for the projection periods. All assumptions can be modified to fit specific key drivers of the business to see their impact on the DCF Valuation Model. You can access the Scenario Analysis from the Case Selection drop-down menu in cell E7.

Up to 5 years of historical data can be entered into the income statement, balance sheet, and cash flow statement; the following projected years are driven by formulas from the Assumptions section. The Supporting Schedules section is all formulas that are tied to the Assumptions and 3 Statement sections so no editing is necessary.

The DCF Model section consists of a separate set of assumptions to drive the valuation along with projected Free Cash Flow to arrive at a Terminal Value. This is broken down further to show Equity and Enterprise values per share.

Lastly, the Charts and Graphs section displays the Free Cash Flow and Intrinsic vs. Market Values visually. The correlating data is above the graphs and tied to the model with formulas so they will automatically adjust to any modifications in the model.

All cells in blue font are input cells where custom information can be entered. All cells in black font are formulas set to streamline the model. Sections are grouped to condense the model to view sections individually.