DCF Valuation Modeling Questions &
answers
What are two benefits of making a compacted DCF model - ANSWERS1. Helps us
learn the main features of a DCF model
2. Helps in a situation where we need a quick analysis
What are two important dates in a DCF - ANSWERS1. Timing of the cashflows
2. Date of Valuation
The time value of money is also called the _______ - ANSWERSThe time quantity of
money
What is the simplified formula to discount the cashflows - ANSWERSUnlevered Free
Cash Flow (UFCF)/ Weighted Average Cost of Capital (WACC)
What are the three types of valuation techniques? - ANSWERSDiscounted Cashflow
Analysis
Comparable Trading Analysis
President Transaction analysis
Define Unlevered Free Cashflow - ANSWERSCash flow available to all capital providers
Define Weighted Average Cost of Capital - ANSWERSThe cost of capital from all
capital providers
What is the Enterprise Value in a DCF using Free Cashflows - ANSWERSEnterprise
value = PV of UFCF/WACC
How long into the future should we forecast in a DCF? - ANSWERSIn perpetuity (This is
a common interview question)
What are the two parts of a DCF? - ANSWERS1. Discrete Forecast
2. Terminal Value
What is a terminal value of a firm? - ANSWERS
When is the start and end of the discrete forecast? - ANSWERSIt starts when the
company is growing faster than the overall economy and ends when the company
grows at the same rate of the economy
, When is the start and end of a Terminal Value forecast? - ANSWERSThe Terminal
value forecast starts when the company experiences the same amount of growth as the
overall economy and then continues forever (Using a growing perpetuity formula)
Perpetuity Growth formula - ANSWERSPV1=CF2/(R-G)
PV=Present Value of cashflow
CF=Cashflow of the next year
R= Required Return
G=Growth Rate
What does Enterprise Value represent? - ANSWERSOur view of the companies value
Equity Value formula - ANSWERSEquity Value = Enterprise Value - Net Debt
What is Net Debt formula? - ANSWERSTotal Debt - Cash = Net Debt
What if the formula for Equity Value per Share? - ANSWERSEquity Value/Shares
Outstanding = Equity Value per Share
What is the keyboard shortcut for Zooming in and out? - ANSWERSCtrl Alt +
or
Ctrl Alt -
What is the excel shortcut to group tabs? - ANSWERSCtrl Shift Pg up/dn
What how do you make the discrete forecast excel formula? -
ANSWERS=EDATE(today, # of months in future)
For a sensitivity analysis what is the excel shortcut - ANSWERSAlt A W T
For row input you put terminal value growth rate
For Column input cell you put WACC
Before you make data tables you must check excel for what? - ANSWERSFile-
>Options->Formulas
Under workbook calculations make sure its set to "Automatic" not "Manuel" or "Except
for data tables."
What is an inportant thing to remember when making data tables - ANSWERSMake
sure that the X and Y axis is stated as a value and not linked to any other cells
Make sure the Terminal Growth rate is on the middle on the X axis
Make sure that the WACC is in the middle on the y-axis
answers
What are two benefits of making a compacted DCF model - ANSWERS1. Helps us
learn the main features of a DCF model
2. Helps in a situation where we need a quick analysis
What are two important dates in a DCF - ANSWERS1. Timing of the cashflows
2. Date of Valuation
The time value of money is also called the _______ - ANSWERSThe time quantity of
money
What is the simplified formula to discount the cashflows - ANSWERSUnlevered Free
Cash Flow (UFCF)/ Weighted Average Cost of Capital (WACC)
What are the three types of valuation techniques? - ANSWERSDiscounted Cashflow
Analysis
Comparable Trading Analysis
President Transaction analysis
Define Unlevered Free Cashflow - ANSWERSCash flow available to all capital providers
Define Weighted Average Cost of Capital - ANSWERSThe cost of capital from all
capital providers
What is the Enterprise Value in a DCF using Free Cashflows - ANSWERSEnterprise
value = PV of UFCF/WACC
How long into the future should we forecast in a DCF? - ANSWERSIn perpetuity (This is
a common interview question)
What are the two parts of a DCF? - ANSWERS1. Discrete Forecast
2. Terminal Value
What is a terminal value of a firm? - ANSWERS
When is the start and end of the discrete forecast? - ANSWERSIt starts when the
company is growing faster than the overall economy and ends when the company
grows at the same rate of the economy
, When is the start and end of a Terminal Value forecast? - ANSWERSThe Terminal
value forecast starts when the company experiences the same amount of growth as the
overall economy and then continues forever (Using a growing perpetuity formula)
Perpetuity Growth formula - ANSWERSPV1=CF2/(R-G)
PV=Present Value of cashflow
CF=Cashflow of the next year
R= Required Return
G=Growth Rate
What does Enterprise Value represent? - ANSWERSOur view of the companies value
Equity Value formula - ANSWERSEquity Value = Enterprise Value - Net Debt
What is Net Debt formula? - ANSWERSTotal Debt - Cash = Net Debt
What if the formula for Equity Value per Share? - ANSWERSEquity Value/Shares
Outstanding = Equity Value per Share
What is the keyboard shortcut for Zooming in and out? - ANSWERSCtrl Alt +
or
Ctrl Alt -
What is the excel shortcut to group tabs? - ANSWERSCtrl Shift Pg up/dn
What how do you make the discrete forecast excel formula? -
ANSWERS=EDATE(today, # of months in future)
For a sensitivity analysis what is the excel shortcut - ANSWERSAlt A W T
For row input you put terminal value growth rate
For Column input cell you put WACC
Before you make data tables you must check excel for what? - ANSWERSFile-
>Options->Formulas
Under workbook calculations make sure its set to "Automatic" not "Manuel" or "Except
for data tables."
What is an inportant thing to remember when making data tables - ANSWERSMake
sure that the X and Y axis is stated as a value and not linked to any other cells
Make sure the Terminal Growth rate is on the middle on the X axis
Make sure that the WACC is in the middle on the y-axis
