Discounted Cash Flow Exam (Actual 2025/2026) Questions & Answers | Latest Update | Certified Quality | Graded A+

Discounted Cash Flow Exam (Actual 2025/2026) Questions & Answers | Latest Update | Certified Quality | Graded A+ Walk me through a DCF A DCF values a company based on the present value of its cash flows and the present value of its terminal value. First, you projected out a company's financials using assumptions for revenue growth, expenses, and working capital; then you get down to free cash flow for each year, which you then sum up and discount back to a net present value, based on your discount rate - usually the weighted average cost of capital. Once you have the present value of the cash flows, you determine the company's terminal value, using either the multiples method or the Gordon Growth method, and then also discount that back to its net present value using WACC. Finally, you add the two together to determine the company's enterprise value