Discounted Cash Flow | DCF Model Step by Step Guide

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Discounted Cash Flow step by step guide using free DCF excel model.
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RESOURCES:
💻 DCF Template for this video: view.flodesk.com/pages/61fba6...
📹 Valuation Methods Video: • How to Value a Company...
In this video, we go over how to create a discounted cash flow with the end goal of reaching a company's intrinsic value. Through this, we can determine if a company's share price is over or undervalued. From free cash flows, to the WACC, to Terminal value, all the technical concepts are explained and applied using the Excel model.
Key steps in this DCF model:
- Forecast the FCF, typically for a 5-10y period
- Calculate the Weighted Average Cost of Capital (WACC)
- Calculate the Terminal Value
- Discount the cash flows to present
- Reach a valuation and calculate an implied share price
LEARN:
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Chapters:
0:00 - Intro
1:08 - DCF Steps
2:40 - Free Cash Flow
6:23 - WACC
9:35 - Terminal Value
12:11 - Discounting Cash Flows
13:45 - Equity Value
15:05 - Full DCF Model
19:22 - Assumptions
Disclaimer: I may receive a small commission on some of the links provided at no extra cost to you.

Опубликовано:

25 июл 2024

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Комментарии : 460

@KenjiExplains 2 года назад

👉 Get 25% OFF Financial Edge Using Code KENJI25: bit.ly/3Ds47vS

@dushyantguntukwar6342 Год назад

what if the growth is not stable how to calculate make a video?

@jameszhang4798 10 месяцев назад

Kenji, for the tax rate, do I go in the SEC fillings to find that number？

@mxdrives 2 года назад

I am a recent graduate in Finance and I have to say that the way you explain things are far better than 99% of the professors I had. I am so thankful for your content. Please keep up wonderful work, Kenji!

@gaelimadeddine3139 Год назад

I agree he explains very well, but maybe watching a summary after getting a course helps. I am not sure that someone completly stranger to finance would understand. This a a good way to revise after getting a full course. So don't be too harsh on your former teachers. ;-)

@CarlosTorres-px6op Год назад

Probably you've got an interview in two days, so you're paying attention now, while didn't give a fuck when your teacher tried his best to tell you what terminal value was.

@abc33944 11 месяцев назад

professors like to make things sound complex ,suits there ego

@ruiqingqiu9010 2 года назад

Got an assignment of DCF without having any classes before. Tried a few crash course videos, only yours taught me the real thing in a short time. Thank you so much!

@KenjiExplains 2 года назад

Thanks for the nice comment means a lot 🙏

@australianpatriot 2 года назад

@@KenjiExplains how did u find the beta, cost of debt, etc?

@culifabrizio1479 Год назад

@@australianpatriot bettas are in the internet, then you leveraged to your company

@HaceSunnyDSol 2 года назад

bros carrying us all to an investment banking offer.

@nobody6118 Год назад

Get into leverage financing part..much more fun and rewarding

@Ismail28462 10 месяцев назад

@@nobody6118why do you recommend that?

@jamesdillan1928 7 месяцев назад

@@nobody6118trzstz

@nicklaslouie5693 2 года назад

You’re offering a lot of value through your channel. Good work.

@KenjiExplains 2 года назад

Thank you 🙏

@Asw_2004 2 месяца назад

@@KenjiExplains At 5:14 why isnt the EBIT multiplied by (1-Tc) which is -75% or 0.075

@DonAlacran4 2 года назад

Great video Kenji! You essentially condensed what I got out of an entire semester long course in corporate finance down to 20 minutes... super impressive! Your tone and pacing really kept me engaged, and the breaks in between excel calculations and concept breakdowns were so well done. Really looking forward to your next video man, keep it up!

@KenjiExplains 2 года назад

Thank you for the awesome comment means a lot! 🙏

@orlandogomes7466 2 года назад

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@abboudjr 11 месяцев назад

You know why your video works?Because you're not cocky and trying to show off your knowledge, but instead you're actually sharing knowledge.I love it...Keep up the good work.

@xX3laal9amtXx 2 года назад

Wow, I studied finance non of my professors had explained it as clear as you did. You are brilliant in delivering knowledge and ever thing ❤️

@KenjiExplains 2 года назад

Haha thanks for the nice message means a lot! Glad it was helpful :)

@jamesstramer5186 2 года назад

Thanks man. I really love the fact that you give a brief overview at the start of every video which really helps connect each concept to the whole.

@KenjiExplains 2 года назад

Thank you!

@shmulyseligson Год назад

I have recently started in the finance industry and even though I didn't understand all the technicalities, I was able to follow along and learn the formulas and process of a DCF analysis. Thank you!

@vikramadityarathore97 2 года назад

Hey man kenji excellent work , you simplify things in finance so well.I would be extremely grateful if you make video based on how do we create assumptions for financial models.

@rolandjambaya8332 2 года назад

@Kenji Explains Wow! Lets just say, not all Teachers need to go to a Teacher training course or college! I have just watched your videos on Valuation in preparation for my assignment, thank you very much! You made a very complicated subject, appear so easy! Thank you, very clear good pace, no unnecessary jargon. Thank you!

@dhruvpatel7637 2 года назад

Learning about this in college right now, nice video to help me recap/summarize what I learned. Great help!

@Maannggoo 2 года назад

Wonderful explanation! I’ve never actually felt that i got the DCF model before this video. Now everything is well organized in my minde. Thank you for such an amazing effort.

@mayurbhatia2250 Год назад

I would take a moment to appreciate you to put and explain these contents. Please keep it up doing, you are very good at this.

@huhh6264 2 года назад

I don't think I would every find a better video than this one on whole youtube .....thank you so much ✅✅✅

@jeremiahkorakali4587 2 года назад

Great video Kenji. I thought you should have mentioned why the terminal value was also in the same year as the last forecasted cashflow year. For those who wondered why, it is because the terminal value is calculating the present value of all future cash flow based on the assumption that the last projected cashflow year is the present time. This is adjusted by discounting further back to actual present time along with the other forecasted cashflows.

@KenjiExplains 2 года назад

Thanks for the input!

@kugankumar202 2 года назад

Thank you so much for this Kenji, this was a great resource to learn from and I am very grateful to you!

@programmingjo 9 месяцев назад

I've never dealt with Intrinsic Valuing methods in my life. This was very infomative and useful. Thanks.

@neerajtatikola4797 21 день назад

Great refresher for me who had learned this about 10 years ago

@TN-wi6ge 2 года назад

Thanks Kenji for a great video! You made it really easy to understand! It would be wonderful if you make a separate video about how assumptions and sensitivity analysis!

@KenjiExplains 2 года назад

Thank you and will keep that in mind!

@frankvdnieuwenhuizen4602 Год назад

Thank you very much for this very clear explanation and highly instructional video. I'm a enthusiastic beginning investor with basically no knowledge of these kind of processes. Your videos make stuff a lot more easy and therefor much more fun. Keep up the good work.

@camlex6310 2 года назад

Really clear explanation! Another great video, thanks Kenji

@edinya6934 2 года назад

I love what you providing to us thank so much! Continue to do so God bless you.

@svenkats71 2 года назад

Thank you Kenji -- the templates are easy and simple -- you explained it very well and Of course, I had a great learning

@user-gv1fj3ok4h 5 месяцев назад

Awesome video. It's been beaten to a pulp by now, but you really do explain this better than most finance professors. Haven't had to do one of these in a long time with current role, and brushing up. You'd be a killer teacher.

@aakashagarwal9827 2 года назад

Best DCF explanation I've seen so far!!! keep making more model explanation videos. Thank you so much

@KenjiExplains 2 года назад

Thank you! More in the pipeline!

@nikhilpachauri5761 2 года назад

Thanks for explaining it with such ease.. It would have been great if I had you as teacher 10 years back when I was doing my MBA

@ankitbulsara6875 2 года назад

This is the best explanation of DCF model on youtube.Thank you Sir...

@stevendoan6072 2 года назад

Thank you, Kenji! What a good explaination!

@puminprapusakpitak3996 2 года назад

Appreciated! Very useful one. Thanks Kenji.

@MrSilenxe Год назад

That video was just amazing. Thank you, now i can say that im pretty familiar with the DCF model in an interview

@jenniferpreston3080 Год назад

I have watched a couple DCF video's, this video is one of the better explanation. He is fast, so I had to watch it a couple time. The excel file was very helpful.

@gaborscharioth8270 6 месяцев назад

When you did the Discounting Cash Flows Calculation the WACC was 7.5%, not 8% probably not visible because you decreased the decimal. Took me a second to find out what was wrong with my calculation. Thank you for the video, helped me a lot.

@emmanuellcho4115 14 дней назад

Caught that too. Thanks for confirming

@willzinner8813 2 года назад

class video man, so easy to understand love it

@kennethchong4385 2 года назад

Well curated, depth, pace and knowledge impeccable.

@sdave6259 2 года назад

Best crash course ever...so much easier to understand than my finance course! Really, Thank you!

@KenjiExplains 2 года назад

Great to hear thanks for watching it means a lot! :)

@excelmaster8651 Год назад

Thank you for taking the time to prepare this video. it helped me to grasp a good knowledge in the area I was struggling.

@toniweigl9783 2 года назад

After the third video of yours today, this is so amazing, I have to do a valuation of a company for university and I have the feeling, your videos are so much more valuable than anything I‘ve learned so far. Thanks a lot, really appriciate your work!

@toniweigl9783 Год назад

@@Pens4Life85 I am studying at University Cologne in Germany. What exactly do you need?

@toniweigl9783 Год назад

@@Pens4Life85 let me know how to get in contact

@jacobnorman5420 2 года назад

Keni, thank you for this videos and all your videos I have not yet seen but I am going to see.

@zachgoll 2 года назад

Have been looking for a video like this for a while! Really nicely done, very helpful.

@KenjiExplains 2 года назад

Thank you!

@cuelbkk 2 года назад

Excellent video. Simple and to the point

@kabilanv6453 10 месяцев назад

It's a great video, with a clear-cut explanation. Thank you very much :)

@feastflavorswithdipti4067 2 года назад

hello kenji, i am CFA and seen your vidios for brush up ..its worth. keep it up.

@fazalrehman6375 2 года назад

Great! I got lots of things clear through your video.

@Milton-ij9eg Месяц назад

GREAT CONTENT! Thank you Kenji.

@chshree007 2 года назад

Learned more than my lectures here! Awesome Kenji!

@amyazaire1114 2 года назад

Thank you Kenji! Keep up the great work!

@KenjiExplains 2 года назад

Thanks for always supporting! :)

@vaibhavkeshari9620 2 года назад

You are so helpful, thank you so much!

@z.kuwait5277 9 месяцев назад

Excellent guide. Thank you!

@Oscar-yo3jy 2 года назад

Hi Kenji, Great content as always! Could you possibly do another video on DCF valuation using forecasted free cash flows? How would you go about predicting the future cash flows of a given company? I understand that it may be a lengthy process, but for those trying to break into investment banking or investment management I think it would be really informative. Thanks!

@KrishnaShah-hp7su 2 года назад

yes this is much needed . Please Kenji if you noticed this cmnt consider making a full video on DCF

@kazihasib3508 2 года назад

Highly appreciate your video! Thank you😊😊

@janice9001 2 года назад

Thank you so much for this informative tutorial, you've just saved my life for my finance project!

@KenjiExplains 2 года назад

Glad I could help!

@linelogic1699 2 года назад

You are one of the very few who explained why D&A is added to the FCF calculation . Great Video for non finance background people like me.

@KenjiExplains 2 года назад

Thank you! Appreciate the nice comment :)

@vaishnavikp6788 2 года назад

Such a great way of explanation....... Thanks alot for this!

@srikanthkanagal1 Год назад

one of the best concise videos i saw. Thanks a lot

@OA-hm9xn Год назад

This is possibly the best explainer I've seen

@andrasbajusz9290 4 месяца назад

Thank you! Helped me a lot!

@sheikhraihan8550 Год назад

Great stuff man. Thank you!!

@raquelsousa2618 2 года назад

Thank you very much. This video helped me a lot!

@erendirmilli3323 2 года назад

Very nice work Kenji!

@jackieyip 2 года назад

Wow, you have explained far better than my professor on these finance calculations.

@delaneybausch5372 11 месяцев назад

Very helpful video! Great job.

@janoshajdu4552 2 года назад

Hi Kenji, would highly appreciate if you could do a video about how to make the in-depth EBIT calculation for the projected years, based on historical data and CAGR. (as shown at 19 minute)

@dineshlutchmun8534 8 месяцев назад

Exactly i need that too

@jayhoe8174 2 года назад

dude, this is literally the best video on this topic out there. You just made me pass my interview!

@KenjiExplains 2 года назад

haha that's awesome man congrats!

@kalox314 Год назад

great great great tutorial! thanks!

@georgemoros3839 Год назад

Really helpful video. Thank you so much !

@andrewsalmon100 Год назад

Thanks very much. Beautifully presented.

@ianapindi8837 Год назад

This was really helpful!

@williama.rivera9414 2 года назад

Good and precise explanation. Thank you for teaching

@ionutciprianfarcas6420 Год назад

Thank you a lot for the DCF template!

@WOLF-wd8mp 8 месяцев назад

Many thanks Kenji!!!!! You are greatttttt!!!!1

@alexandredelcommune5316 Год назад

videos amazing, your Excel tutorial videos helped me pass an Excel hiring test

@rafabranez Год назад

Very nice video and excellent explanation! Thank you!!

@fitfirst4468 2 года назад

Thank you so much Kenji

@juanbautistamarini3787 2 года назад

Thanks, Kenji!!

@subhrajitchakraborty8170 Год назад

Thank you for this video :)

@method341 4 месяца назад

Dude, that shirt is SICK! Never seen that color combination in a Polo before.

@Chrisparkinj 2 года назад

very helpful, you are brilliant, thank you very much and good luck on your journey

@hamzaraptor 2 года назад

Thank you for this detailed video

@almadeunrebel Год назад

thank you for making your model open source

@aidanmilla5699 Год назад

Great explanation, thank you

@aryandalai3389 6 дней назад

thanks buddy ,really useful

@Skylarbill4332 2 года назад

Love this video! Thank you so much for the explanation. For further suggestions, is it possible to have a explanation of the 3-statements financial modeling concept? Thanks a lot!

@KenjiExplains 2 года назад

Noted thank you!

@chwftw23 2 года назад

SUBSCRIBED!!!! Great detailed explanations. Thank you

@KenjiExplains 2 года назад

Awesome, thank you!

@haneenhaseeb7319 25 дней назад

Kenji is a Gem.

@poojasah5672 Год назад

all concepts cleared. thank you soo much sir

@dianhidayanti8693 2 года назад

Thanks a lot Kenji

@colinmahon887 2 года назад

Super Informative Video Kenji!

@KenjiExplains 2 года назад

Great to hear thanks!

@michaelquach7046 2 года назад

Well done. Great breakdown for something that can get so complex.

@robertadesigns1039 Год назад

Thank you so much!

@pratima1rajguru 2 месяца назад

Thanks Kenji, what a brilliant non cocky way of explaining tough concepts

@KenjiExplains 2 месяца назад

thank you!!

@macoynaguit1968 2 года назад

Thank you Kenji!

@davidcayuela5536 2 года назад

Amazing video Kenji! Thanks a lot!!! It would be amazing if you do a second part of this video analyzing a real and famous company to watch how do you find all the numbers and how it works in the excel. Thanks and greetings from Spain! Great content! 👏🙌

@KenjiExplains 2 года назад

Thanks for the idea, will look into it! Un saludo David

@anthonymunoz9148 2 года назад

Yes please!

@jimmysindia Год назад

thanks kenji... simple and on topic...

@AbdulQadir-gf5nv 2 года назад

Thank you so much for such an excellent explanation 👍🏼

@KenjiExplains 2 года назад

Thanks for watching!

@johncase9153 Год назад

You have a very nice presentation. I use a Model presented by P. Dorsey, who was with Morningstar, that looks at equity instead of equity & debt. The essential inputs are next year's free cash flow (FCF), FCF growth rate, discount rate, & perpetuity growth rate. I look for companies that have very stable free cash flows for periods of 5 to 10 years ($KO). I have found that you can apply linear regression analysis to project next year's free cash flow and can estimate the 95% confidence interval. I estimate the FCR growth rate & uncertainty. I also estimate uncertainty for the discount rate & perpetuity rate. I use the First Order Second Moment Method (FOSM) to propagate uncertainty. I obtain a probability distribution function (PDF) for the intrinsic value of a stock, and look to see what the probability of failure is if I purchase the stock at its current price.