Discount Cash Flow Modeling to Find the Intrinsic Value

5/9/2019

●Intrinsic Valuation- The value of a company determined by fundamental analysis
●DCF- The sum of all the cash flows it will generate, discounted to the present value at a rate that reflects the riskiness of the cash flows
●Discount Rate- The required rate of return for the investors and is a function of the riskiness of the cash flows
●How to get Free Cash Flow-

○Revenue

○(COGS)

○(Operating Expenses)

○(Interest and Tax)

○Net Income

○Cash Flow From Operations: Net Income - Change in Working Capital
○FCF: Cash Flow From Operations - CapEx
●Forecasting Cash Flow Statement
○Working capital is usually a fixed percentage of revenue
○CapEx/revenue: take the average of that and that is how you will forecast the rest of Cap Ex
○Depr. and Amort/revenue: percentage and use it to forecast D&A into the future
●WACC- Cost of raising new capital
○WAAC = discount rate
■Discount rate = risk