DCF Model – Calculating Discounted Cash Flows for Valuation Analysis

Posted by Wilbur Omar Chua on September 3rd, 2021

When a business is just starting up, it’s very difficult to determine how much it is worth. With the DCF Valuation Method, we can calculate valuation based on the expected income of the business. Which is why the DCF Model is one of the most theoretically sound valuation methods. Firstly, what is the Discounted Cash flow Analysis? The DCF Method or the Discounted cash flow is the valuation method where you discount all the potential future earnings of the business to determine how much it is worth today. We use this to compute how much a business potentially is when there are still no financials to speak of.  Professional Investors widely use DCF Modelling to aid their decision making. So, how to Calculate Enterprise Value using DCF?

Another crucial factor to discuss is the Terminal Value Calculation,DCFs have the terminal value because it is crucial to the discounted cash flow analysis example because it is the value of the entity or business when all cash flows are discounted to the present time. Aside from the DCF, we will also cover the terminal value formula Excel and Terminal Value NPV Calculation.

How to create a sample DCF Model? In the article we are sharing, we will show you how to make a DCF model in Excel. We will also give you a discounted cash flow Valuation example, the difference between unlevered and levered DCF, DCF model steps, and most importantly applying all these things to know the value of your business.