Walk me through a DCF analysis.

Question

IBPrep · Accepted Answer

(1) Project free cash flows (FCF) for 5–10 years using FCF = EBIT × (1−t) + D&A − CapEx − ΔWorking Capital. (2) Calculate terminal value using either the Gordon Growth Model (FCF × (1+g) / (WACC − g)) or the exit multiple method (EBITDA × multiple). (3) Discount all FCFs and the terminal value back to present using WACC. (4) Sum the PVs to arrive at Enterprise Value. (5) Add cash and subtract debt to get Equity Value. Divide by diluted shares outstanding for implied price per share.

Walk me through a DCF analysis.

Answer

More DCF interview questions

Walk me through a DCF