Valuation and Simple Discounted Cash Flow

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Күн бұрын

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Walking through the essential principles of valuation and how a Discounted Cash Flow Model works. In finance, we use valuation to determine the price we are willing to pay for assets and companies. In this video, we discuss how to discount in Excel, how to calculate free cash flow, and how to build your own DCF model.
The DCF is the first model you need to learn when you're preparing for investment banking recruiting. You'll need to walk through the mechanics of one in an investment banking interview and you should be able to build one from scratch by the time you hit the desk as an analyst.
0:00 - Intro
0:24 - What is Valuation?
1:45 - The Discounted Cash Flow
2:55 - How to Discount in Excel
3:59 - Simple DCF Template
Peak Frameworks is a business career prep service started by Matt Ting and Patrick Fong, who have each spent several years working in investment banking and private equity in New York and Silicon Valley. Matt and Patrick met at Evercore, a top tier investment bank, and over the years have tutored and coached dozens of candidates to land their dream business job.
Matt Ting: / matthewting
Patrick Fong (HBS 2021): / patrick-fong-0b773041
#Valuation #InvestmentBanking #DCF

Пікірлер: 45

@boss8177 3 жыл бұрын

Bro this video was amazing. I've looked at so many DCF videos and always get confused but you've explained it so well and in such a nice way that I think I'm actually getting the hang of it. You just got a new subscriber fam & I'll continue watching these videos.

@jonathanfraga3580 3 жыл бұрын

Thanks Matt, super helpful intro to the DCF. Helped give me the perspective to launch my in-depth prep and understand what I'm looking at without feeling completely lost and clueless.

@TheMinimalistPortfolio 3 жыл бұрын

Great stuff! Exactly the right amount of detail without going too far in depth

@invest_maktab 3 жыл бұрын

The best explanation I saw. With really clear examples

@jingyewang7742 3 жыл бұрын

Thank you for explaining succinctly DCF. It helped me a lot to prepare for my mba interview!

@ryanhillier7213 3 жыл бұрын

this was a super clear example.. thanks man

@soeunbae 3 жыл бұрын

I usually don't leave comment but it was really easy to understand and clear. Thank you!

@christophermonin2503 3 жыл бұрын

This is incredibly helpful, thank you!!

@dylanrocksify 4 жыл бұрын

Incredibly helpful content, post more similar videos!

@EvanEvansE3 2 жыл бұрын

Dude, you are a very good teacher! 👊

@prithvianilkumar4758 4 жыл бұрын

Great video!

@zensorrow1 3 жыл бұрын

This video is excellent - thank you friend

@dillonkay6913 3 жыл бұрын

DCF is a pretty simple answer. The real meat is building up the three statement model. Consider making a high level video covering this?

@PeakFrameworks 3 жыл бұрын

Potentially down the line, but it's hard to explain in a simple video! We walk through 3-statement LBO models in our PE course.

@fatemeazizi1863 3 жыл бұрын

Hi Dillon , I would like to introduce you to the free online business valuation software of Ratiba . I hope it is useful for your business. retiba.com/online-valuation/discounted-cash-flows/ Online valuation tools in this software are : 1. DCF Method 2. Risk Factors Summation : retiba.com/online-valuation/risk-factors-summation/ 3. Multiples Method : retiba.com/online-valuation/multiples-method/ 4. Score Cards Method : retiba.com/online-valuation/score-cards-method/

@nycbankers1427 3 жыл бұрын

Thank you so much I’m just a non finance major trying to break the industry

@tomaszjankowski3878 3 жыл бұрын

I've got an interview coming up and this cleared things up a lot so thanks!

@PeakFrameworks 3 жыл бұрын

Good luck mate!

@EstherYu9117 3 жыл бұрын

This is perfect - thank you for the video! You talked so fast, I change the playback setting to 0.75

@nasarkapoor9815 11 ай бұрын

Wow super class

@HICHAM-FINANCIER 5 ай бұрын

Thank you so much for the video, just one question why we don't use EBIT or even better EBI and we deduct only investments and increase in working capital?

@user-pp8xq7wr5p 4 жыл бұрын

Thanks 👌🏾 I'm looking forward to a career in ib, im gonna attend University of Saint Gallen next year 😁

@fatemeazizi1863 3 жыл бұрын

I would like to introduce you to the free online business valuation software of Ratiba . I hope it is useful for your business. retiba.com/online-valuation/discounted-cash-flows/ Online valuation tools in this software are : 1. DCF Method 2. Risk Factors Summation : retiba.com/online-valuation/risk-factors-summation/ 3. Multiples Method : retiba.com/online-valuation/multiples-method/ 4. Score Cards Method : retiba.com/online-valuation/score-cards-method/

@adamhamid5508 3 жыл бұрын

What would be the NPV equivalent in this DCF?

@dannyperrier2785 3 жыл бұрын

I love the content, would you be able to demonstrate this model on a working company from yahoo finance ?

@PeakFrameworks 3 жыл бұрын

This kind of detail is actually covered in our Valuation and Finance Starter Kit from the Peak Frameworks website, but not available on KZfaq.

@marina.06 3 жыл бұрын

Hi, Where do you get the EBIDTA multiple of 10X ? Is that a constant?

@PeakFrameworks 3 жыл бұрын

Yes, that's right. It's an assumption and an input into the model.

@flint1914 3 жыл бұрын

why did u use the ebitda multiple for calculate the terminal value , instead of fcf multiple of the 10th year?

@PeakFrameworks 3 жыл бұрын

I would say EBITDA multiple is more common because the data point is way more common. It's easy to find EBITDA multiples for past deals because that's the metric everyone uses. It's really hard to get a reliable FCF multiple because a lot of companies don't report that figure. Theoretically you could use either though.

@technologic3739 3 жыл бұрын

Don't know if it's a stupid question but why does Present Value of Asset = Present Terminal Value + Present Value of Projected FCF?

@PeakFrameworks 3 жыл бұрын

These are the only two components in the value of an asset. Projected FCF is what the value is from the projection period (e.g., the first 10 years of the assets). Terminal value is everything after that point (so year 11 and onwards). There are no other years possible!

@bamudeadson 3 жыл бұрын

Is there a set multiplier that's added on after calculating the interest per year, say 10% a year for 10 years drops that 100$ valuation down to 60$(I'm just guessing I didnt do the math), I'd image you'd want to pay under 60 for the risk that it wont generate that full value over 10 years. Is it based on industry? Market trends? Pure speculation? I've never seen anyone mention this theory but I feel like it would be important. Obviously you wouldnt want to pay full price even after dowcojnting for average annual market return, youd want to pay less depending on how much percieved risk there is or even for percieved growth which might make it worth more than that $60 to an investor

@PeakFrameworks 3 жыл бұрын

No, there's not really a set multiplier, you have to go through the process of doing the analysis

@lyhjiba 2 жыл бұрын

Holy poop I can't believe we get to watch this for free....

@ntcuong01ct1 3 жыл бұрын

Dear friends, I don't clear and I have a question : How to determine the cash flow in the DCF method?. Thank you.

@andrewhuang8203 3 жыл бұрын

CF in the DCF method typically is Unlevered Free Cash Flow. - To get to Unlevered FCF: -> Revenue - COGS - OpEx = EBIT -> EBIT(1-t) + Depreciation/Amortization - Changes in Net Working Capital - CapEx = Unlevered FCF

@ntcuong01ct1 3 жыл бұрын

@@andrewhuang8203 , thank you

@ntcuong01ct1 3 жыл бұрын

@@andrewhuang8203 , i have another question : with the capital budgeting process, we should examine the depreciation and tax costs, is it right?

@mattj9435 2 жыл бұрын

You missed D&A in this model.

@PeakFrameworks 2 жыл бұрын

The tax calculation is the part that is an oversimplification in this model. This is because taxes should be calculated on EBT, not EBITDA. However, we don't need to add back D&A again when working to free cash flow because we're starting from EBITDA. I.e., D&A is already included in the calculation. So D&A is not actually missed.