Eight tasks that build one DCF from the top line to value per share, on a company you haven't seen: Corvin Pumps. Your answers stay on the sheet as you go.
The order is the one every DCF follows, and the one a modeling test grades:
- revenue and EBIT;
- taxes on EBIT and NOPAT;
- D&A, capex and working capital;
- unlevered free cash flow;
- discount factors and present values;
- terminal value and its present value;
- enterprise value, equity value and value per share;
- upside and how much of the value is terminal.
Watch three traps from the unit: taxing EBIT, not pre-tax income; growing the final cash flow one year before the perpetuity formula; and discounting the terminal value with the final year's factor.