VALUATION BASED (ON DCF MODEL)
GUIDELINES
This template uses a DCF Model to value a business. DCF is used as tool to compare the valuation of the business with
current market value and manifests the attractiveness of the business. DCF uses future free cash flows and discounts it with
Weighted Average Cost of Capital score to arrive at the present value of the business. The DCF for an investment is
calculated by estimating the cash you will have to pay out and the cash you think you will receive back. The times that you
expect to receive the payments must also be estimated. Each cash transaction must then be discounted by the opportunity cost
of capital over the time between now and when you will pay or receive the cash.
Assumptions Assumptions on which the valuation is done
Forecasted P&L Forecasted P&L
Balance Sheet Balance Sheet
WACC Weighted Average Cost of Capital
Valuation Free cash flow calculation
Note: cells marked in yellow require your input.
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ASSUMPTIONS
Note: cells marked in yellow require your input.
Revenue Growth Rate Assumptions Sustainable
2012 E 2013 E 2014 E 2015 E 2016 E 2017 Onwards Phase Types of Phases
1 Product 1 0% 0% 0% 0% 0% 0% Introduction
2 Product 2 0% 0% 0% 0% 0% 0% Growth
3 Product 3 0% 0% 0% 0% 0% 0% Mature
4 Product 4 0% 0% 0% 0% 0% 0% Decline
5 Product 5 0% 0% 0% 0% 0% 0%
WC Change as a Percentage of Revenue (%) 0% 0% 0% 0% 0% 0%
EBITDA as a % of Sales 0% 0% 0% 0% 0% 0%
Tax Rate (%) 0% 0% 0% 0% 0% 0%
Capital Expenditure (%) 0% 0% 0% 0% 0% 0%
Depreciation (%) 0% 0% 0% 0% 0% 0%
Terminal Growth Rate 0%
Assumptions for Free Cash Flow Valuation:
1 xxxxx
2 xxxxx
3 xxxxx
4 xxxxx
5 xxxxx
6 xxxxx
7 xxxxx
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FORECASTED P&L
Note: cells marked in yellow require your input.
2009 2010 2011 2012 E 2013 E 2014 E 2015 E 2016 E 2017 and Onwards
Operating Revenues as Adjusted
Product 1 100 200 300 300 300 300 300 300 300
Product 2 250 350 450 450 450 450 450 450 450
Product 3 - - - - - - - - -
Product 4 - - - - - - - - -
Product 5 - - - - - - - - -
Total Operating Revenues 350 550 750 750 750 750 750 750 750
Total Operating Expenses 75 80 90
Operating Income (Loss) 275 470 660
Other Income (Expense)
Interest Expense - - -
Equity in Net Income of Affiliates - - -
Other Income (Expense) – Net - - -
Total other income (expense) - - -
Income (Loss) from Continuing Operations Before Income Taxes 275 470 660
Income Tax (Benefit) Expense - - -
Income (Loss) from Continuing Operations 275 470 660
Income (Loss) from Discontinued Operations, Net of Tax - - -
Net Income (Loss) 275 470 660
Less: Net Income Attributable to Noncontrolling Interest - - -
Net Income (Loss) Attributable to Company 275 470 660
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BALANCE SHEET
Note: cells marked in yellow require your input.
2009 2010 2011
Assets
Current Assets
Cash and cash equivalents - - -
Accounts receivable – net of allowances for doubtful accounts - - -
Prepaid expenses - - -
Deferred income taxes - - -
Other current assets - - -
Total current assets - - -
Property, Plant and Equipment – Net - - -
Goodwill - - -
Licenses - - -
Customer Lists and Relationships – Net - - -
Other Intangible Assets – Net - - -
Investments in Equity Affiliates - - -
Other Assets - - -
Total Assets - - -
Liabilities and Stockholders’ Equity
Current Liabilities
Debt maturing within one year - - -
Accounts payable and accrued liabilities - - -
Advanced billing and customer deposits - - -
Accrued taxes - - -
Dividends payable - - -
Total current liabilities - - -
Long-Term Debt - - -
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes - - -
Postemployment benefit obligation - - -
Other noncurrent liabilities - - -
Total deferred credits and other noncurrent liabilities - - -
Stockholders’ Equity
Common Stock - - -
Additional paid-in capital - - -
Retained earnings - - -
Treasury stock - - -
Accumulated other comprehensive income - - -
Noncontrolling interest - - -
Total stockholders’ equity - - -
Total Liabilities and Stockholders’ Equity - - -
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WEIGHTED AVERAGE COST OF CAPITAL
Note: cells marked in yellow require your input.
Beta 0.56
Return from Market (Rm) 22%
Risk Free Return (Rf) 5%
Risk Premium 17%
Pre Tax Cost of Debt 12%
Tax Rate 0%
Market Value of Debt -
Market Value of Equity 168,000
Total Capital 168,000
Equity Debt Capital
Market Value 168,000 336,000 504,000
Weight in Cost of Capital 33.33% 66.67% 100.00%
Cost of Component 14% 12.00% 12.68%
© Copyright 2011 Docstoc Inc. 5
VALUATION
Note: cells marked in yellow require your input.
Year 2012 E 2013 E 2014 E 2015 E 2016 E 2017 and owards
Nat Sales 750 750 750 750 750 750
EBITDA as a % of Sales 0% 0% 0% 0% 0% 0%
EBITDA - - - - - -
Depreciation (% of Sales) 0% 0% 0% 0% 0% 0%
Depreciation - - - - - -
Operating Profit - - - - - -
Tax Rate on EBIT (%) 0% 0% 0% 0% 0% 0%
Tax - - - - - -
NOPAT - - - - - -
Depreciation - - - - - -
CAPEX - - - - - -
% of Sales 0% 0% 0% 0% 0% 0%
Working Capital - - - - - -
% of Sales 0% 0% 0% 0% 0% 0%
Cash Flow for DCF - - - - - -
WACC (%) 12.68% 12.68% 12.68% 12.68% 12.68% 12.68%
Terminal Growth Rate 0.00%
Present Value of Cash Flows - - - - -
Terminal Value -
FCFF -
Net Debt -
FCFE -
No. of shares 6,495
Share Price Acc to Valuation -
Current Market Price 27
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