Every investor should have a basic grasp of the discounted cash flow (DCF) technique. Here, Tim Bennett introduces the concept, and explains how it can be applied to valuing a company.
Views: 487259 MoneyWeek
Learn the building blocks of a simple one-page discounted cash flow (DCF) model consistent with the best practices you would find in investment banking. If you are preparing for investment banking interviews, know that the DCF is the source of a TON of investment banking interview questions. To download the backup Excel file, go to www.wallstreetprep.com/blog/financial-modeling-quick-lesson-building-a-discounted-cash-flow-dcf-model-part-1/ The DCF modeled here is a simplified version of a fully-integrated DCF model. For a deeper dive into DCF modeling in Excel, please visit www.wallstreetprep.com.
Views: 366389 Wall Street Prep
The discount cash flow analysis (DCF) is a fundamental valuation methodology broadly used by investment bankers, corporate officers, and other finance professionals. It is based on the principal that the value of a company can be derived from the PV of its projected free cash flow (FCF). While many videos cover the actual framework and how to build the excel model, the assumptions and thinking behind the model are often left to more “real world” examples. This is that example! Chapter 3 covered topics like; - How do you project revenues for a DCF model? - How many years do you project cashflows for? - What is the exit multiple method? - What is the perpetuity growth method? - How do you project EBITDA for a DCF model? - How do you project EBIT for a DCF model? - How do you project the NWC for a DCF model? - What is the mid-year convention? - How do you calculate unlevered free cash flow? For those who are interested in buying the Investment Banking: Valuation, Leveraged Buyouts, and Mergers and Acquisitions by Joshua Rosenbaum and Joshua Pearl, follow the Amazon link below; https://www.amazon.ca/Investment-Banking-Valuation-Leveraged-Acquisitions/dp/1118656210 If you have any other questions, please comment below. If you enjoyed the video and found it helpful, please like and subscribe to FinanceKid for more videos soon! For those who may be interested in finance and investing, I suggest you check out my Seeking Alpha profile where I write about the market and different investment opportunities. I conduct a full analysis on companies and countries while also commenting on relevant news stories. http://seekingalpha.com/author/robert-bezede/articles#regular_articles Videos referenced; Estimating Cost of Debt For WACC: https://www.youtube.com/watch?v=CSkPlxEe-dY Estimating Cost Of Equity For WACC: https://www.youtube.com/watch?v=ZigyWoDAMrE Projecting NWC; https://www.youtube.com/watch?v=2E1Hca2dVbI Why Is Your DCF Model Incorrect? https://www.youtube.com/watch?v=ByyK0AMuLxc
Views: 8279 FinanceKid
Discounted cash flow (DCF) is a means of determining the present value of future cash flows by using the concept of time value of money. According to time value of money, money now (due to its earning potential) is worth more than money in the future. The further into the future cash is to be received, the less it is worth today. There are two standard financial techniques used in discounted cash flow analysis: net present value (NPV) and internal rate of return (IRR). While NPV calculates the total value of a discounted cash flow, its counterpart IRR calculates the annualized effective compounded return rate of the cash flows. ---------- Finance tutoring on Chegg Tutors Learn about Finance terms like Discounted Cash Flow (DCF) on Chegg Tutors. Work with live, online Finance tutors like Alex T. who can help you at any moment, whether at 2pm or 2am. Liked the video tutorial? Schedule lessons on-demand or schedule weekly tutoring in advance with tutors like Alex T. Visit https://www.chegg.com/tutors/Finance-online-tutoring/?utm_source=youtube&utm_medium=video&utm_content=managed&utm_campaign=videotutorials ---------- About Alex T., Finance tutor on Chegg Tutors: QMC, London University, Class of 1975 Biology major Subjects tutored: Astronomy, Pre-Algebra, Basic Math, Data Science, Statistics, Linear Programming, Trigonometry, Microsoft Excel, GMAT, SAT, Computer Science, Algebra, Business, Pre-Calculus, Mathematica, Biology, Basic Science, and Geometry TEACHING EXPERIENCE I have lectured in Biology, Math and Corporate Finance at UC Merced for a number of years. Prior to that, in industry, I developed training programs for 3rd party developers for a financial application used in major financial centers, and a bioinformatics training course for a users of a chemogenomics platform used in drug discovery. I have a course on business forecasting at Udemy: www.udemy.com/business-forecasting-with=google-sheets/ EXTRACURRICULAR INTERESTS I am an avid follower of all things astronomical, most particularly alien worlds and space travel. I have a published a technical book for Springer about a novel approach for space craft design that primarily uses water. My other interests are programming and artificial intelligence. Want to book a private lesson with Alex T.? Message Alex T. at https://www.chegg.com/tutors/online-tutors/Alex-T-2952716/?utm_source=youtube&utm_medium=video&utm_content=managed&utm_campaign=videotutorials ---------- Like what you see? Subscribe to Chegg's Youtube Channel: http://bit.ly/1PwMn3k ---------- Visit Chegg.com for purchasing or renting textbooks, getting homework help, finding an online tutor, applying for scholarships and internships, discovering colleges, and more! https://chegg.com ---------- Want more from Chegg? Follow Chegg on social media: http://instagram.com/chegg http://facebook.com/chegg http://twitter.com/chegg
Views: 10097 Chegg
In this vide, I discuss the Discounted Cash Flow, or DCF, Model as an approach to estimating the intrinsic value of a company's stock. I review the theoretical motivation behind the model and discuss the model's required inputs, assumptions, and forecasts. I walk through building a basic implementation of the DCF model in Microsoft Excel. Part 2 of the video (http://youtu.be/ijpPg8eAhv4) shows the application of the basic Excel DCF model to a real firm, including illustrations of where to find data to support the inputs, assumptions, and forecasts. The music is "Gnomone a Piacere" by MAT64 (http://www.mat64.org/).
Views: 173432 Jason Greene
This video explains how to use the Discounted Cash Flow Model to value a firm. Whereas the Dividend Discount Model values the firm based on future dividends and the Total Payout Model values the firm based on dividends and share repurchases, the Discounted Cash Flow Model values a firm without having to consider dividends, repurchases, or the firm's use of debt. This video provides a comprehensive example to illustrate how the DCF model is used to come up with a valuation. Edspira is your source for business and financial education. To view the entire video library for free, visit http://www.Edspira.com To like us on Facebook, visit https://www.facebook.com/Edspira Edspira is the creation of Michael McLaughlin, who went from teenage homelessness to a PhD. The goal of Michael's life is to increase access to education so all people can achieve their dreams. To learn more about Michael's story, visit http://www.MichaelMcLaughlin.com To follow Michael on Facebook, visit https://facebook.com/Prof.Michael.McLaughlin To follow Michael on Twitter, visit https://twitter.com/Prof_McLaughlin
Views: 24398 Edspira
Discounted Cash Flow (DCF) Formula - Tutorial | Corporate FInance Institute This tutorial is from our course "Introduction to Corporate Finance." Enroll in the full course to upgrade your skills: https://courses.corporatefinanceinstitute.com/courses/introduction-to-corporate-finance -- FREE COURSES & CERTIFICATES -- Enroll in our FREE online courses and earn industry-recognized certificates to advance your career: ► Introduction to Corporate Finance: https://courses.corporatefinanceinstitute.com/courses/introduction-to-corporate-finance ► Excel Crash Course: https://courses.corporatefinanceinstitute.com/courses/free-excel-crash-course-for-finance ► Accounting Fundamentals: https://courses.corporatefinanceinstitute.com/courses/learn-accounting-fundamentals-corporate-finance ► Reading Financial Statements: https://courses.corporatefinanceinstitute.com/courses/learn-to-read-financial-statements-free-course ► Fixed Income Fundamentals: https://courses.corporatefinanceinstitute.com/courses/introduction-to-fixed-income -- ABOUT CORPORATE FINANCE INSTITUTE -- CFI is a leading global provider of online financial modeling and valuation courses for financial analysts. Our programs and certifications have been delivered to thousands of individuals at the top universities, investment banks, accounting firms and operating companies in the world. By taking our courses you can expect to learn industry-leading best practices from professional Wall Street trainers. Our courses are extremely practical with step-by-step instructions to help you become a first class financial analyst. Explore CFI courses: https://courses.corporatefinanceinstitute.com/collections -- JOIN US ON SOCIAL MEDIA -- LinkedIn: https://www.linkedin.com/company/corporate-finance-institute-cfi- Facebook: https://www.facebook.com/corporatefinanceinstitute.cfi Instagram: https://www.instagram.com/corporatefinanceinstitute Google+: https://plus.google.com/+Corporatefinanceinstitute-CFI YouTube: https://www.youtube.com/c/Corporatefinanceinstitute-CFI
Views: 42597 Corporate Finance Institute
Basics of Discounted Cash Flow (DCF) Analysis to value Stocks Online DCF Calculator: https://www.tradebrains.in/dcf-calculator/ Course: 7-Day FREE eCourse of How to invest in Indian share market?-- https://www.tradebrains.in/7-day-ecourse-how-to-invest-in-indian-share-market/ How to pick winning stocks? -- https://courses.tradebrains.in/p/how-to-pick-winning-stocks Discounted cash flow (DCF) analysis is a method of valuing a company using the concepts of the time value of money. All future cash flows are estimated and discounted by using the cost of capital to give their present values. DCF is a very powerful tool for valuing stocks. However, this methodology is only as good as the inputs. Connect with Trade Brains: Blog: https://www.tradebrains.in/ Facebook: https://www.facebook.com/TradeBrainsOfficial Twitter: https://twitter.com/TradeBrainsGrp Google+: https://plus.google.com/+TradeBrains LinkedIn: https://www.linkedin.com/company/13380376/ Tags: DCF Analysis Basics, DCF Analysis Indian stocks, Discounted cashflow analysis, DCF Analysis Indian companies, Discounted cash flow model, DCF model bse stocks, DCF model basics, how to value stocks using DCF
Views: 545 Trade Brains
Here's a quick overview on Valuation. We also construct an entire discounted cash flow analysis on WalMart in conjunction with my book Financial Modeling and Valuation: A Practical Guide to Investment Banking and Private Equity http://www.amazon.com/Financial-Modeling-Valuation-Practical-Investment/dp/1118558766/ref=sr_1_8?ie=UTF8&qid=1422553204&sr=8-8&keywords=valuation
Views: 87666 Paul Pignataro
This video defines free cash flow, provides an equation for calculating free cash flow, and illustrates the equation with an example. Edspira is your source for business and financial education. To view the entire video library for free, visit http://www.Edspira.com To like us on Facebook, visit https://www.facebook.com/Edspira Edspira is the creation of Michael McLaughlin, who went from teenage homelessness to a PhD. The goal of Michael's life is to increase access to education so all people can achieve their dreams. To learn more about Michael's story, visit http://www.MichaelMcLaughlin.com To follow Michael on Facebook, visit https://facebook.com/Prof.Michael.McLaughlin To follow Michael on Twitter, visit https://twitter.com/Prof_McLaughlin
Views: 115496 Edspira
MODELS AND HELPFUL FILES LINK HERE: https://drive.google.com/folderview?id=0B7KHNVOBFX8qMEs1LWlKamZsRE0&usp=sharing
Views: 94855 Martin Shkreli
Download Excel workbook http://people.highline.edu/mgirvin/ExcelIsFun.htm Learn a bit about Recognizing Patterns of Cash Flows For Discounted Cash Flow Analysis. See how to use the NPV function and an x -- y scatter diagram chart to build a Net Present Value Profile.
Views: 6318 ExcelIsFun
Excel Sheet - http://destyy.com/wKaYFe Data Link - https://www.morningstar.in ** This excel sheet is a property TradeTitan and should not be Sold or Distributed by individuals or Third Party Content Creators ** Our Latest Videos - Tata Motors Fundamental Analysis - https://youtu.be/LdRW-TiH74g HEG Vs SUZLON - https://youtu.be/11TZ65lSiHs NIFTY Valuation - https://youtu.be/jC2wnT0rNfw This is the 12th Lesson, on DCF ( Discounted Cash Flow) Valuation Model. This video teaches you how to calculate stock Target Price and Entry Price using the Net Profit of a company. ( ** This Video is Strictly for Educational purposes, and the contents of this video is to help you learn better in terms of Stock investing. None of the Stocks mentioned in this Video are Recommendations to BUY or SELL. These are mere examples so that you can learn better. **)
Views: 12423 Imvestor
You'll learn what "Free Cash Flow" (FCF) means, why it's such an important metric when analyzing and valuing companies. By http://breakingintowallstreet.com/ "Financial Modeling Training And Career Resources For Aspiring Investment Bankers" You'll also learn how to interpret positive vs. negative FCF, and what different numbers over time mean -- using a comparison between Wal-Mart, Amazon, and Salesforce as our example. Table of Contents: 0:54 What Free Cash Flow (FCF) is and Why It's Important 2:26 What Positive FCF Tells You, and What to Do With It 3:56 What Negative FCF Tells You, and What to Do With It 4:38 Why You Exclude Most Investing and Financing Activities in the FCF Calculation 7:55 How to Use and Interpret FCF When Analyzing Companies 11:58 Wal-Mart vs. Amazon vs. Salesforce: Free Cash Flow Across Sectors 19:33 Recap and Summary What is Free Cash Flow? Normally it's defined as Cash Flow from Operations minus Capital Expenditures. Tells you the company's DISCRETIONARY cash flow - after paying for expenses and working capital requirements like inventory and capital expenditures, how much cash flow can it put to use for other purposes? If the company generates a lot of Free Cash Flow, it has many options: hire more employees, spend more on working capital, invest in CapEx, invest in other securities, repay debt, issue dividends or repurchase shares, or even acquire other companies. If FCF is negative, you need to dig in and see if it's a one-time issue or recurring problem, and then figure out why: Are sales declining? Are expenses too high? Is the company spending too much on CapEx? If FCF is consistently negative, the company might have to raise debt or equity eventually, or it might have to restructure itself or cut costs in some other way. Why Do You Exclude Most Investing and Financing Activities Other Than CapEx? Because all other activities are, for the most part, "optional" and non-recurring. A normal company does not NEED to buy stocks or issue dividends or repurchase shares... those are all optional uses of cash. All it NEEDS to do to keep its business running is sell products to customers, pay for expenses, and keep investing in longer-term assets such as buildings and equipment (PP&E). Debt repayment and interest expense are "borderline" because some variations of Free Cash Flow will include them, others will exclude them, and some will include interest expense but not debt principal repayment. How Do You Use Free Cash Flow? It's used in a DCF (or at least, a variation of it) to value a company; it's also used in a leveraged buyout (LBO) model to determine how much debt a company can repay. And you can calculate it on a standalone basis for use when comparing different companies. The key is to DIG IN and see why Free Cash Flow is changing the way it is - Organic sales growth? Artificial cost-cutting? Accounting gimmicks? Different working capital policies? IDEALLY, FCF will be increasing because of higher units sales and/or higher market share, and/or higher margins due to economies of scale. Less Good: FCF is growing due to cost-cutting, CapEx slashing, or FCF is growing in spite of falling sales and profits... because of a company playing games with Working Capital, non-core activities, or CapEx spending. Wal-Mart vs. Amazon vs. Salesforce Comparison Main takeaway here is that Wal-Mart's FCF is all over the place, but Cash Flow from Operations is MOSTLY growing, so that appears to be driven by the also growing organic sales. The company is doing some odd things with CapEx and Working Capital, which led to fluctuations in FCF - not exactly "bad" or "good," just neutral and requires more research. With Amazon, they've increased CapEx spending massively in the past 2 years so that has pushed down CapEx. CFO is growing, driven by organic revenue growth (no "games" with Working Capital), but it's very difficult to assess whether all that CapEx spending will pay off in the long-term. With Salesforce, FCF is definitely growing organically (Revenue growth leads directly to CFO growth, and CapEx varies a bit but not as much as with Amazon), but the company is also spending a ton on acquisitions... will it continue? If CapEx as a % of revenue stays low, it will most likely continue to spend on acquisitions - unlikely to issue dividends, repurchase shares, etc. since it's a growth company. Further Resources http://youtube-breakingintowallstreet-com.s3.amazonaws.com/105-10-Free-Cash-Flow.xlsx http://youtube-breakingintowallstreet-com.s3.amazonaws.com/105-10-Walmart-Financial-Statements.pdf http://youtube-breakingintowallstreet-com.s3.amazonaws.com/105-10-Amazon-Financial-Statements.pdf http://youtube-breakingintowallstreet-com.s3.amazonaws.com/105-10-Salesforce-Financial-Statements.pdf
Views: 140362 Mergers & Inquisitions / Breaking Into Wall Street
This video is valid for both 2018 & 2019 CFA exams. This CFA exam prep video lecture covers: Net Present Value and Internal Rate of Return NPV and NPV Rule NPV and IRR using the financical calculator IRR and IRR Rule Problems with the IRR Rule Practice questions For the COMPLETE SET of 2018 Level I CFA Videos sign up for the IFT Level I FREE VIDEOS Package: https://ift.world/free Subscribe now: http://www.youtube.com/user/arifirfanullah?sub_confirmation=1 For more videos, notes, practice questions, mock exams and more visit: https://www.ift.world/ Visit us on Facebook: https://www.facebook.com/Pass.with.IFT/
Views: 16361 IFT
Thank you for watching the video! In this video we explain what discounted cash flow (dcf) is. We present calculating a discount rate and the weighted average cost of capital (WACC). We also explain the tax shiel effect and explain how the net present value of a company is calculated. In addition we explain how the terminal value is calculated. In the end of the Video we also explain the difference between equity and entity methods.
Views: 5492 easyfinance
Learn more about Preston’s Intrinsic Value Course that teaches you step-by-step how to calculate the intrinsic value of a stock in 18 exclusive videos: https://www.theinvestorspodcast.com/product/intrinsic-value-course/ Watch my other investing courses: https://www.theinvestorspodcast.com/tip-academy/#tipcourses Download Preston's 1 page checklist for finding great stock picks: http://buffettsbooks.com/checklist Preston Pysh is the #1 selling Amazon author of two books on Warren Buffett. The books can be found at the following location: http://www.amazon.com/gp/product/0982967624/ref=as_li_tl?ie=UTF8&camp=1789&creative=9325&creativeASIN=0982967624&linkCode=as2&tag=pypull-20&linkId=EOHYVY7DPUCW3WD4 http://www.amazon.com/gp/product/1939370159/ref=as_li_tl?ie=UTF8&camp=1789&creative=9325&creativeASIN=1939370159&linkCode=as2&tag=pypull-20&linkId=XRE5CA2QJ3I2OWSW Use the intrinsic Value Calculator at: http://www.buffettsbooks.com/security-analysis/intrinsic-value-calculator-dcf.html Value stocks with the Discount Cash Flow Intrinsic Value Calculator
Views: 94736 Preston Pysh
In this WACC and Cost of Equity tutorial, you'll learn how changes to assumptions in a DCF impact variables like the Cost of Equity, Cost of Debt. By http://breakingintowallstreet.com/ "Financial Modeling Training And Career Resources For Aspiring Investment Bankers" You'll also learn about WACC (Weighted Average Cost of Capital) - and why it is not always so straightforward to answer these questions in interviews. Table of Contents: 2:22 Why Everything is Interrelated 4:22 Summary of Factors That Impact a DCF 6:37 Changes to Debt Percentages in the Capital Structure 11:38 The Risk-Free Rate, Equity Risk Premium, and Beta 12:49 The Tax Rate 14:55 Recap and Summary Why Do WACC, the Cost of Equity, and the Cost of Debt Matter? This is a VERY common interview question: "If a company goes from 10% debt to 30% debt, does its WACC increase or decrease?" "What if the Risk-Free Rate changes? How is everything else impacted?" "What if the company is bigger / smaller?" Plus, you need to use these concepts on the job all the time when valuing companies… these "costs" represent your opportunity cost from investing in a specific company, and you use them to evaluate that company's cash flows and determine how much the company is worth to you. EX: If you can get a 10% yield by investing in other, similar companies in this market, you'd evaluate this company's cash flows against that 10% "discount rate"… …and if this company's debt, tax rate, or overall size changes, you better know how the discount rate also changes! It could easily change the company's value to you, the investor. The Most Important Concept… Everything is interrelated - in other words, more debt will impact BOTH the equity AND the debt investors! Why? Because additional leverage makes the company riskier for everyone involved. The chance of bankruptcy is higher, so the "cost" even to the equity investors increases. AND: Other variables like the Risk-Free Rate will end up impacting everything, including Cost of Equity and Cost of Debt, because both of them are tied to overall interest rates on "safe" government bonds. Tricky: Some changes only make an impact when a company actually has debt (changes to the tax rate), and you can't always predict how the value derived from a DCF will change in response to this. Changes to the DCF Analysis and the Impact on Cost of Equity, Cost of Debt, WACC, and Implied Value: Smaller Company: Cost of Debt, Equity, and WACC are all higher. Bigger Company: Cost of Debt, Equity, and WACC are all lower. * Assuming the same capital structure percentages - if the capital structure is NOT the same, this could go either way. Emerging Market: Cost of Debt, Equity, and WACC are all higher. No Debt to Some Debt: Cost of Equity and Cost of Debt are higher. WACC is lower at first, but eventually higher. Some Debt to No Debt: Cost of Equity and Cost of Debt are lower. It's impossible to say how WACC changes because it depends on where you are in the "U-shaped curve" - if you're above the debt % that minimizes WACC, WACC will decrease. Otherwise, if you're at that minimum or below it, WACC will increase. Higher Risk-Free Rate: Cost of Equity, Debt, and WACC are all higher; they're all lower with a lower Risk-Free Rate. Higher Equity Risk Premium and Higher Beta: Cost of Equity is higher, and so is WACC; Cost of Debt doesn't change in a predictable way in response to these. When these are lower, Cost of Equity and WACC are both lower. Higher Tax Rate: Cost of Equity, Debt, and WACC are all lower; they're higher when the tax rate is lower. ** Assumes the company has debt - if it does not, taxes don't make an impact because there is no tax benefit to interest paid on debt.
Views: 114742 Mergers & Inquisitions / Breaking Into Wall Street
The concept of discounted cash flow (net present value) as a method of investment appraisal is covered in this revision video.
Views: 6499 tutor2u
This video follows Part 1 (available here: http://youtu.be/77ivvN2Uk28), which reviewed the basics of a DCF Model, including how to program a basic model in an Excel spreadsheet. This video illustrates a Discounted Cash Flow Model applied to a real firm. In particular, I discuss the various sources that help inform the inputs, assumptions, and forecasts for the DCF model, including freely available sources on the web, as well as Bloomberg Professional. Disclaimer: This video is for educational purposes only. It is not investment advice. It is not intended to recommend either positively or negatively the company that is used in the illustrative example. The music is "Gnomone a Piacere" by MAT64 (http://www.mat64.org/).
Views: 91784 Jason Greene
Understand what makes stocks of companies valuable and key stock indicators like EPS and P/E. For more free lessons, stock discussions and to earn $100 for getting educated, go to WealthLift at http://bit.ly/xHp7Ay. WealthLift, the best free way to learn investing! - http://bit.ly/xHp7Ay
Views: 68311 wealthlift
Lets change the discount rates depending on how far out the payments are. Created by Sal Khan. Watch the next lesson: https://www.khanacademy.org/economics-finance-domain/core-finance/interest-tutorial/personal-bankruptcy-tut/v/personal-bankruptcy-chapters-7-and-13?utm_source=YT&utm_medium=Desc&utm_campaign=financeandcapitalmarkets Missed the previous lesson? Watch here: https://www.khanacademy.org/economics-finance-domain/core-finance/interest-tutorial/present-value/v/present-value-3?utm_source=YT&utm_medium=Desc&utm_campaign=financeandcapitalmarkets Finance and capital markets on Khan Academy: If you gladly pay for a hamburger on Tuesday for a hamburger today, is it equivalent to paying for it today? A reasonable argument can be made that most everything in finance really boils down to "present value". So pay attention to this tutorial. About Khan Academy: Khan Academy offers practice exercises, instructional videos, and a personalized learning dashboard that empower learners to study at their own pace in and outside of the classroom. We tackle math, science, computer programming, history, art history, economics, and more. Our math missions guide learners from kindergarten to calculus using state-of-the-art, adaptive technology that identifies strengths and learning gaps. We've also partnered with institutions like NASA, The Museum of Modern Art, The California Academy of Sciences, and MIT to offer specialized content. For free. For everyone. Forever. #YouCanLearnAnything Subscribe to Khan Academy’s Finance and Capital Markets channel: https://www.youtube.com/channel/UCQ1Rt02HirUvBK2D2-ZO_2g?sub_confirmation=1 Subscribe to Khan Academy: https://www.youtube.com/subscription_center?add_user=khanacademy
Views: 325724 Khan Academy
CFA | FRM | SFM | Excel Live Classes | Videos Available Globally For Details: www.aswinibajaj.com WhatsApp: +91 9831149876 or https://api.whatsapp.com/send?phone=919830497377&text=Want%20to%20know%20more%20about%20CFA%20classes & we shall get back to you. E-mail: [email protected] Hope you had a great learning experience! Do Like and Subscribe! And check our other videos on Finance (CFA, FRM, SFM), Resume making, Career options, etc.
Views: 9813 ASWINI BAJAJ
What is DISCOUNTED CASH FLOW? What does DISCOUNTED CASH FLOW mean? DISCOUNTED CASH FLOW meaning - DISCOUNTED CASH FLOW definition - DISCOUNTED CASH FLOW explanation. Source: Wikipedia.org article, adapted under https://creativecommons.org/licenses/by-sa/3.0/ license. In finance, discounted cash flow (DCF) analysis is a method of valuing a project, company, or asset using the concepts of the time value of money. All future cash flows are estimated and discounted by using cost of capital to give their present values (PVs). The sum of all future cash flows, both incoming and outgoing, is the net present value (NPV), which is taken as the value or price of the cash flows in question. Using DCF analysis to compute the NPV takes as input cash flows and a discount rate and gives as output a present value; the opposite process—takes cash flows and a price (present value) as inputs, and provides as output the discount rate—this is used in bond markets to obtain the yield. Discounted cash flow analysis is widely used in investment finance, real estate development, corporate financial management and patent valuation. It was used in industry as early as the 1700s or 1800s, widely discussed in financial economics in the 1960s, and became widely used in U.S. Courts in the 1980s and 1990s. The most widely used method of discounting is exponential discounting, which values future cash flows as "how much money would have to be invested currently, at a given rate of return, to yield the cash flow in future." Other methods of discounting, such as hyperbolic discounting, are studied in academia and said to reflect intuitive decision-making, but are not generally used in industry. The discount rate used is generally the appropriate weighted average cost of capital (WACC), that reflects the risk of the cashflows. This WACC can be found using Perry's calculation model which was developed in 1996. The discount rate reflects two things: 1. Time value of money (risk-free rate) – according to the theory of time preference, investors would rather have cash immediately than having to wait and must therefore be compensated by paying for the delay 2. Risk premium – reflects the extra return investors demand because they want to be compensated for the risk that the cash flow might not materialize after all Discounted cash flow calculations have been used in some form since money was first lent at interest in ancient times. Studies of ancient Egyptian and Babylonian mathematics suggest that they used techniques similar to discounting of the future cash flows. This method of asset valuation differentiated between the accounting book value, which is based on the amount paid for the asset. Following the stock market crash of 1929, discounted cash flow analysis gained popularity as a valuation method for stocks. Irving Fisher in his 1930 book The Theory of Interest and John Burr Williams's 1938 text The Theory of Investment Value first formally expressed the DCF method in modern economic terms. To show how discounted cash flow analysis is performed, consider the following simplified example. John Doe buys a house for $100,000. Three years later, he expects to be able to sell this house for $150,000. Simple subtraction suggests that the value of his profit on such a transaction would be $150,000 - $100,000 = $50,000, or 50%. If that $50,000 is amortized over the three years, his implied annual return (known as the internal rate of return) would be about 14.5%. Looking at those figures, he might be justified in thinking that the purchase looked like a good idea. 1.1453 x 100000 = 150000 approximately. However, since three years have passed between the purchase and the sale, any cash flow from the sale must be discounted accordingly. At the time John Doe buys the house, the 3-year US Treasury Note rate is 5% per annum. Treasury Notes are generally considered to be inherently less risky than real estate, since the value of the Note is guaranteed by the US Government and there is a liquid market for the purchase and sale of T-Notes. If he hadn't put his money into buying the house, he could have invested it in the relatively safe T-Notes instead. This 5% per annum can therefore be regarded as the risk-free interest rate for the relevant period (3 years).
Views: 4133 The Audiopedia
How to Value Stocks Using Discounted Cash Flow DCF Analysis in a spreadsheet. JOIN OWEN & RASK's FREE INVESTOR CLUB TODAY! www.raskfinance.com/subscribe Part 7 of 7 (the finale, hooray!) of our free value investing course. In this video, Owen moves step-by-step through a real DCF Analysis. DCFs are the most common valuation technique used by analysts and investors to calculate the value or price targets of shares/stocks. For the other (free) valuation lessons -- including the VALUATION SPREADSHEET -- follow the link to download from our site (also free): www.raskfinance.com/courses For other FREE valuation spreadsheets, tutorials, videos, courses and more visit: https://www.raskfinance.com/courses/ *** JOIN OUR FREE INVESTOR'S CLUB! www.raskfinance.com/subscribe *** Looking for more finance and investment education and insights? Visit us: www.raskfinance.com where you'll find FREE videos, investment insights, courses, quizzes, tests and more. It's all FREE. *** GENERAL ADVICE DISCLAIMER This video contains general information only. That means the information does not take into account your objectives, financial situation or needs. Therefore, you should consider if the information is appropriate to you and your needs, before acting on it. It's always a good idea to read the product disclosure statement (PDS) of the financial product before making a decision to buy or acquire it. One last thing: past performance is not a reliable indicator of future performance. The Rask Group Pty Ltd (ACN: 622 810 995) ("we", "our" or "us") is a Corporate Authorised Representative (No. 1264179) of Strawman Pty Ltd (AFSL: 501 223). Please refer to our financial services guide (FSG), available on our website, for more details.
Views: 952 Rask Finance
Explained simply, the discounted cash flow is the sum of the cash flows discounted to their present value. Remember, the discounted cash flow does not have the initial investment. Blog post (For excel sheet): http://www.cheaphouseswilmington.com/realestate-dcf-excel/ Connect on Linkedin: https://www.linkedin.com/in/teddysmithnc Download my FREE spreadsheet: http://www.cheaphouseswilmington.com/free-real-estate-investment-calculator-spreadsheet/ Follow me on Twitter: https://twitter.com/cheaphouseswilm
Views: 11873 Teddy Smith
This video walks through a more thorough discounted cash flow ("DCF") model. In this video we will use an integrated financial statement model to perform a DCF analysis of a company. (www.ASimpleModel.com) Please visit ASimpleModel.com for more detail.
Views: 4051 A Simple Model
This beginner friendly video explains how to value any company and business or stock using a discounted cash flow analysis (DCF). Beta, Equity Risk Premium, Debt Ratio and other terms will be explained such that everyone understands how to perform this valuation. We first look at annual and quarterly reports and check Return on Capital (ROC), Growth, Sales/Capital, Reinvestment Needs to come up with a plausible story for future Free Cash Flow (after Capital expenditures, change in Working Capital and added Depreciation) and Terminal Value. Then we calculate our Discount Rate with an unlevered Business Beta and our Debt to Equity Ratio, Default Spread and Synthetic Rating as a WACC and sum all the present values (= discounted FCFs) up as the value of an asset is just the sum of future CFs.
Views: 95 Beat The Market
Learn Financial Modelling taught by Investment Bankers from Goldman Sachs, Merrill Lynch and CSFB at DeZyre. Click here to know more details http://www.dezyre.com/Financial-Modelling/1 This video teaches you how to use the DCF / Discounted Cash Flow valuation method to value companies. The most popular valuation metric used by all financial analysts and investment bankers. Understand how to quantify a companies future cash flows and how to arrive at a per share equity value based on future cash flow projections. Also learn how to step by step calculate Free Cahs Flow using MS Excel.
Views: 77150 BusinessFinance
The Discounted Cash Flow DCF Analysis is one of the most widely used methods of valuing a company. Equity analysts and investment bankers around the world use the Discounted Cash Flow analysis to find the intrinsic value of a stock. This Bloomberg Tutorial will show you how to use the discounted cash flow DCF function in Bloomberg and how to download and use the Excel Discounted Cash Flow template provided by Bloomberg. If you are new to financial modeling you should start by learning a basic Discounted Cash Flow model and build from there.
Views: 24854 Fintute
For details, visit: http://www.financewalk.com DCF, Discounted Cash Flow Valuation in Excel Video Discounted Cash Flow (DCF) Valuation DCF valuation can be defined as: "A valuation method used to estimate the attractiveness of an investment opportunity. Discounted cash flow (DCF) analysis uses future free cash flow projections and discounts them (most often using the weighted average cost of capital-which reflects the riskiness of the cash flows) to arrive at a present value, which is used to evaluate the potential for investment. If the value arrived at through DCF analysis is higher than the current cost of the investment, the opportunity may be a good one." DCF valuation comes handy when there are no comparable companies available in the market. DCF involves some steps which takes into account firm's capital structure, inflation rate, growth of the economy, growth of the company, riskiness of the project, working capital management, capital expenditure required in future years etc. Inputs to Discounted Cash Flow Models • Discount Rates -- Cost of Debt+Cost of Equity • Expected Cash Flows -- FCFF , FCFE , Dividends • Expected Growth Rate Steps in DCF Step 1 -- Forecast/Measure Free Cash Flow Step 2 -- Estimate WACC/Cost of Equity Step 3 -- Use WACC to discount FCF Step 4 -- Estimate Terminal (Residual) Value Step 5 -- Use WACC to discount Terminal Value Step 6 - Estimate Total Present Value of FCF Step 7 -- Add value of Non-operating Assets Step 8 -- Subtract value of Liabilities assumed Step 9 -- Calculate Value of Common stock
Views: 166358 Avadhut Nigudkar
We review the *intuition* behind the Gordon Growth Formula used to calculate Terminal Value in a Discounted Cash Flow (DCF) analysis. By http://breakingintowallstreet.com/ "Financial Modeling Training And Career Resources For Aspiring Investment Bankers" Lots of people, textbooks, training programs, professors, and so on present this formula, but hardly anyone takes the time to explain what it means, where it comes from, and how it works. We'll explain here both the INTUITION behind the formula, and then also give a mathematical derivation for it, based on the sum of a geometric series. If you like math, you'll really like that part! Here's the Table of Contents for the lesson: 1:12 Gordon Growth Method Intuition 2:37 The Intuition -- No Growth in Cash Flows 7:46 The Intuition -- Growth in Cash Flows 15:23 The Algebra Behind Gordon Growth 17:40 The Common Ratio 18:41 The Algebra: Putting It All Together 22:49 Gordon Growth Method Summary Gordon Growth Method Intuition The basic intuition here is that we can pay: Annual Free Cash Flow / Discount Rate For an investment, if the cash flow stays the same each year and we're targeting a specific yield on our investment (known as the "discount rate" in a DCF). Why? Think about if you could make an investment that earned $100 in cash flows each year. You're targeting a 10% yield on your investment. How much could you pay for it? $1,000, because $1,000 * 10% = $100 in cash flows each year. You can use the NPV function in Excel with $100 in cash flow each year (e.g., =NPV(10%, Long series of $100 you've entered in consecutive cells)) to verify this. The NPV, or "net present value," IS this number - what we could afford to pay for a series of cash flows at a given yield we're targeting. The Intuition -- Growth in Cash Flows This works fine if there's no growth and the cash flows stay the same each year, but what if they're growing? Well, in that case we can afford to pay MORE than that $1,000 and still get the same 10% yield... because there's growth! Specifically, we can now pay: First Year Free Cash Flow / (Discount Rate - FCF Growth Rate) for this investment. In the Terminal Value calculation, that "First Year Free Cash Flow" is written as Final Year Projected Free Cash Flow * (1 + FCF Growth Rate)... ...because we're going one year BEYOND the end of our projection period in the model. By *subtracting* the growth rate in the denominator, we make the denominator smaller... which makes the amount we can pay significantly bigger. If cash flows grow more quickly, the denominator gets even smaller and the entire number gets even bigger. If cash flows grow more slowly, the denominator gets bigger and the entire number gets smaller. Let's say the cash flows start at $100 and grow by 3% per year. We're targeting a discount rate of 10%. The NPV here would be $1,429, or $100 / (10% - 3%). Why does this work? Why can we pay $1,429 and still get that 10% yield? Think about it like this... The yield in Year 1 is is $100 / $1429, or 7.0% But then by Year 5, it's $113 / $1429, or 7.9%. And then as you keep going, the Yield gets higher and higher... because we have growth. By Year 20, it's $175 / $1429, or 12.3%. So, over all those years into the future, the average comes out to 10%... because it's LESS than 10% in the early years and greater than 10% much later on. So the weighted average, factoring in the time value of money, still comes out to that 10% yield we were targeting. The Algebra Behind Gordon Growth Please see the video for this part - it's almost impossible to explain in text form, and it would be too long to post in the YouTube description. Gordon Growth Method Summary We care about this because everyone uses this formula to calculate Terminal Value in a DCF, but hardly anyone explains where it comes from. The basic idea is that you can pay more for a company that's growing its cash flows than for one that's NOT growing its cash flows. And to represent that, you use the formula: Final Year, Projected Period Free Cash Flow * (1 + FCF Growth Rate) / (Discount Rate - FCF Growth Rate) To approximate the amount you could pay for the Free Cash Flows in the Terminal Period - which is the Terminal Value in a DCF.
Views: 46904 Mergers & Inquisitions / Breaking Into Wall Street
dcf website link :- http://tradingchanakya.com/dcf-calculator/ hello friends today's video concept is what is a dcf valuation and how to calculated fair value in 2 min with dcf calculator
Views: 17213 Trading Chanakya
The Finance Coach: Introduction to Corporate Finance with Greg Pierce Textbook: Fundamentals of Corporate Finance Ross, Westerfield, Jordan Chapter 10: Making Capital Investment Decisions Objective 5 - Key Concepts: Evaluating Cost Cutting Proposals Setting the bid price Evaluating equipment options with different lives To buy/Not to buy Projected Cash Flow After-Tax Salvage Value More Information at: http://thefincoach.com/
Views: 3951 TheFinCoach
Vielen Dank für das Anschauen des Videos! Unser Wikifolio: https://www.wikifolio.com/de/de/w/wfsmallliq In diesem Video erklären wir Euch was man unter Discounted Cash Flow versteht. Dabei errechnen wir die Discount Rate anhand der weighted average cost of capital (WACC). Wir gehen auf den Effekt des Tax Shields ein und erklären wie man mit dem Net Present Value den Wert von Unternehmen berechnen kann. Auch erklären wir die Berechnung der ewigen Rente (Terminal Value). Am Ende gehen wir noch auf die Equity und Entity Methoden ein.
Views: 22479 easyfinance
Download Excel workbook http://people.highline.edu/mgirvin/ExcelIsFun.htm Learn how to do Asset Valuation Using Discounted Cash Flow Analysis PV Function.
Views: 24313 ExcelIsFun
The Finance Coach: Introduction to Corporate Finance with Greg Pierce Textbook: Fundamentals of Corporate Finance Ross, Westerfield, Jordan Chapter 10: Making Capital Investment Decisions Objective 5 - Key Concepts: Evaluating Cost Cutting Proposals Setting the bid price Evaluating equipment options with different lives To buy/Not to buy Projected Cash Flow After-Tax Salvage Value More Information at: http://thefincoach.com/
Views: 1135 TheFinCoach
Download Excel workbook http://people.highline.edu/mgirvin/ExcelIsFun.htm 1. Incremental Cash Flows = difference between future cash flows with a project & without the project. 2. Any cash flow that exists regardless of whether or not a project is undertaken in not relevant. 3. Incremental Cash Flows = Aftertax Incremental Cash Flows 4. Sunk Costs not relevant 5. Opportunity Costs are relevant 6. Side Effects/Erosion are relevant 7. Change in Net Working Capital is relevant 8. Financing Costs are dealt with as a managerial variable and are not considered with the projects cash flows (Cash Flow To/From Creditors or Stockholders).
Views: 12906 ExcelIsFun
Discusses design of global supply chain networks. Includes decision tree and discounted cash flow analysis. Next video: https://goo.gl/ggnvxS First video: https://goo.gl/WR1aHv All videos: https://goo.gl/Qiuvhr
Views: 3374 Bharatendra Rai
Premium Course: https://www.teachexcel.com/premium-courses/68/idiot-proof-forms-in-excel?src=youtube Excel Forum: https://www.teachexcel.com/talk/microsoft-office?src=yt Excel Tutorials: https://www.teachexcel.com/src=yt This tutorial shows you how to get the Net Present Value of a project or business venture in the future using excel. You can do this very easily in excel spreadsheets and this will teach you how to do that using the estimated cash flows of a project. The NPV() function is used for the calculations. This is also a basic discounted cash flows example. This includes discount rate and number of periods in order to use the npv function. To follow along with the spreadsheet used in the video and also to get free excel macros, tips, and more video tutorials, go to the site: http://www.TeachMsOffice.com
Views: 271250 TeachExcel
In this video, I talk through the concept of Discounted Cash Flow using the lottery. DCF is an important topic for the Series 65 and Series 66. Concepts covered: discounted cash flow, opportunity cost, discount rate, DCF formula Visit my website and social media for additional help & resources: Website: http://www.basicwisdom.net Twitter: https://twitter.com/thebasicwisdom Instagram: https://www.instagram.com/basicwisdom/ Facebook: https://www.facebook.com/basicwisdom/
Views: 553 Basic Wisdom