1 Exampromax - Stuvia US 2025/2026
Walk me Thru a DCF - Essentials Questions
with Detailed Verified Answers (100% Correct
Answers) Already Graded A+
Walk me thru a DCF?
Ans: 1. First, project your cash flows out for roughly 5-10 years
2. Second, discount these cash flows to account for the time value of
money. Assume you are using unlevered FCF and calculate the Weighed
Average Cost of Cashflows (WACC)
©, 2025 All rights reserved®
3. Third, assuming the company does not stop after the projected cash flows
Exampromax - Stuvia US
- determine the terminal value of the company.
4. Fourth, discount this terminal value to account for the time value of
money.
5. Sum the values to find Enterprise Value (EV) then subtract Net Debt and
divide by Diluted Shares to find intrinsic share price of the company.
What is WACC and how do you calculate it?
Ans: WACC = Weighted Average Cost of Capital: used as the discount
rate in a DCF analysis to present value projected free cash flows and
terminal value.
Reflects the cost of each type of capital (debt, equity, and preferred stock)
weighted by the respective percentage of each type of capital in the
company's capital structure.
WACC = [Cost of Equity * %Equity (E/E+D+P)] + [Cost of Debt * %Debt
(D/E+D+P) * (1-tax rate)]
Walk me Thru a DCF - Essentials Questions
with Detailed Verified Answers (100% Correct
Answers) Already Graded A+
Walk me thru a DCF?
Ans: 1. First, project your cash flows out for roughly 5-10 years
2. Second, discount these cash flows to account for the time value of
money. Assume you are using unlevered FCF and calculate the Weighed
Average Cost of Cashflows (WACC)
©, 2025 All rights reserved®
3. Third, assuming the company does not stop after the projected cash flows
Exampromax - Stuvia US
- determine the terminal value of the company.
4. Fourth, discount this terminal value to account for the time value of
money.
5. Sum the values to find Enterprise Value (EV) then subtract Net Debt and
divide by Diluted Shares to find intrinsic share price of the company.
What is WACC and how do you calculate it?
Ans: WACC = Weighted Average Cost of Capital: used as the discount
rate in a DCF analysis to present value projected free cash flows and
terminal value.
Reflects the cost of each type of capital (debt, equity, and preferred stock)
weighted by the respective percentage of each type of capital in the
company's capital structure.
WACC = [Cost of Equity * %Equity (E/E+D+P)] + [Cost of Debt * %Debt
(D/E+D+P) * (1-tax rate)]
