Course Content

Mastering Discounted Cash Flow Analysis with Excel

1. Introduction to Business Valuation

What You'll Learn About DCF and Business Valuation Why Valuing a Business Matters for Investors and Owners Overview of Business Valuation Methods

2. Understanding Discounted Cash Flow (DCF) Analysis

Introduction to the Discounted Cash Flow Valuation Method DCF Money Printing Machine Example DCF Formula Calculations

3. Cash Flow Forecasting and Discount Rate Fundamentals

How to Calculate Unlevered Free Cash Flow (UFCF)Understanding the Discount Rate in Valuation How to Calculate Cost of Debt Cost of Debt Calculation Example How to Calculate Cost of Equity (CAPM)How to Calculate Cost of Equity Using Build Up Method Cost of Equity Calculation Example

4. WACC, Terminal Value & Sensitivity Analysis

Weighted Average Cost of Capital (WACC) Calculation Terminal Value (TV) and Perpetuity Growth Rate (g)Terminal Value Calculation Example Sensitivity Analysis in DCF Valuation

5. Building a DCF Valuation Model in Excel

Company Overview and Valuation Objective Exploring the Excel-Based DCF Model Modeling the Income Statement Items Modeling the Balance Sheet Items Creating Clean Income Statement Output Creating Clean Balance Sheet Output Building the UFCF Model: From EBIT to Operating Cash Flow Accounting for CapEx, Assets & Reconciliation to Net Cash Flow Forecasting UFCF and Linking Cash Flow to the Balance Sheet Final DCF Calculation and Valuation Output Visualizing Results with Excel Charts Performing Sensitivity Analysis in Excel

6. Practical DCF Case Study – Company Valuation in Action

DCF Assignment Walkthrough: From Inputs to Enterprise Value

Introduction to the Discounted Cash Flow Valuation Method

Discounted Cash Flow (DCF) is often referred to as an intrinsic valuation method. Unlike methods that rely on market comparisons, DCF focuses on the true economic value of a business based on its expected future performance.

At its core, DCF is a time value of money model: A dollar today is worth more than a dollar tomorrow—and DCF helps quantify exactly how much more.

Key Concept is Time Value of Money

Money loses value over time due to inflation, risk, and opportunity cost. The DCF method corrects for that by "discounting" future cash flows to reflect what they are worth today.

$\text{DCF} = \frac{CF_1}{(1 + r)^1} + \frac{CF_2}{(1 + r)^2} + \cdots + \frac{CF_n}{(1 + r)^n}$

Mathematically, each year's expected cash flow is divided by (1 + discount rate)^n, where n is the year number. The result is a present value (PV) for each cash flow.

DCF Power

It's forward-looking, capturing potential growth;
It helps separate short-term market noise from long-term value;
It provides a neutral, model-based estimate—not reliant on investor sentiment.

DCF Shortcoming

Forecasting cash flows involves assumptions that must be carefully justified;
Choosing the right discount rate (typically WACC) is essential—it must reflect the riskiness of those cash flows.

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Section 2. Chapter 1

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