Discounted Cash Flow
Value the business on its own projections, and show what the answer depends on.
Seat
IB · ER/HF · PE
Level
Analyst / Associate
Runtime
~35 min
Output
DCF page: Excel model + slides
What this helps you accomplish
Unlevered free cash flow by year, a terminal value on both the perpetuity growth and exit multiple methods, the bridge to equity value per share, and two grids across the discount rate. The methods answer each other: if the exit multiple implied by the growth assumption sits far above where peers trade, the growth assumption is doing too much work.
What you get
Not a description of an output. The file itself, in the conventions a banker, a PE associate or a hedge fund analyst already reads without being told.
{TICKER}_dcf.xlsx
Excel workbook
- 1
Inputs
Shares, net debt, prices, the tax rate, the discount rate, terminal growth, the exit multiple and the mid-year toggle, all as blue cells
- 2
Unlevered free cash flow ($mm)
Revenue to EBITDA to EBIT to NOPAT to free cash flow by year, with the discount period, factor and present value beneath
- 3
Terminal value and equity bridge ($mm)
Perpetuity growth and exit multiple side by side, to enterprise value, equity value, value per share and the premium to the offer, with the implied multiple and implied growth of each method
- 4
Sensitivity grids
Two five-by-five grids of value per share, the rate against terminal growth and the rate against the exit multiple, with the base case shaded
- 5
PowerPoint
Two slides: the cash flow build with the bridge, then the grids with the cells above the offer in bold
Where the numbers come from
From the filings: shares, net debt, trailing revenue, the margins, the effective tax rate and the three-year revenue trend. Every filed figure resolves to its form, period, page, the printed value and a link into the filing on EDGAR. Not from filings: the projections, which are extrapolated from the filed trend until you replace them, the discount rate, terminal growth and the exit multiple. Assumptions are listed on the slide’s source line under "Not from filings", so an assumed input is never read as a filed one.
Run it yourself
python3 skills/deal-slides/build.py dcf --ticker BSX --offer 60Delegate · Verify · Decide
The core L3VLUP principle: AI output is never automatically correct. Know what to hand off, what to check, and what only you can own.
Delegate
AI is good enough to do this.
- • Pulling shares, net debt, trailing revenue, the margins and the tax rate with a citation on each
- • The free cash flow build, the discounting and both terminal methods as live formulas
- • Both sensitivity grids, each cell self-contained so it moves when any input moves
- • Building the two branded slides with the bridge and the grids
Verify
AI accelerates you here, but a professional checks the work.
- • That the effective tax rate is a rate the business will actually pay, not a one-off distorted by a discrete item
- • That the margins used are the trailing margins the filings support
- • That the exit multiple implied by the perpetuity method sits inside the peer range, and the growth implied by the exit multiple is credible
- • That the discount rate matches the cost of capital page
Decide
Judgment the human owns. This is the skill.
- • The projections, and whose case they represent
- • The discount rate, terminal growth and the exit multiple
- • Whether the mid-year convention is right for this cash flow profile
- • Whether the range supports the conclusion the page is being used to reach
Inputs required
- Company name or ticker
- The offer per share
- The projections, if you have a management case
- The discount rate, terminal growth and exit multiple, if not the defaults of 9.0%, 2.5% and 10.0x
- Your own numbers where you would rather not use the default
The workflow
- 1
Resolve the company
A ticker or a name pulls shares, net debt, trailing revenue, the margins and the effective tax rate, each cited.
- 2
Read what is filed against what is assumed
The margins and the tax rate are filed. The projections, the rate and the terminal assumption are not, and the page lists them as assumptions.
- 3
Replace the projections
A trend extrapolated from three years of filings is a starting point. The management case, or your own, is what a valuation should rest on.
- 4
Set the rate and the terminal assumption
The rate is the one the cost of capital page builds. The terminal assumption is checked against the other method before it is accepted.
- 5
Build and read the terminal share
How much of enterprise value sits in the terminal value. Above about three quarters and the forecast years barely matter, which deserves a sentence rather than silence.
- 6
Count the grid
How many combinations clear the offer, and whether the base case sits in the middle of the grid or at a flattering corner.
Run this skill
Any listed company, anywhere. Ticker or name.
Quality checklist
The output isn’t done until every box ticks.
- verify reports zero errors and every derived cell is a formula on blue inputs
- Units are on every table header and the subtitle names the pricing date
- Terminal value as a share of enterprise value is stated on the slide, and above 75% carries a sentence
- The exit multiple implied by the perpetuity method sits inside the peer range
- The discount rate agrees with the cost of capital page when both are in the book
- The shaded base case and the number of cells above the offer are counted in the notes