Build A Full Discounted Cash Flow Model for a REAL Company

[@KenjiExplains]

Take our finance & valuation course: www.careerprinciples.com/courses/finance-valuation-course

[@solomonbhandari-young4154]

Awesome

[@DorBahadurAleMagar]

Hello Kenji, After watching your video of DCF Model of Corporate Valuation, I am able to prepare the valuation of any corporations. Thank you very much for your kind contributions for the people all over the world who really want to start their career in Finance.

[@nicogerst6007]

For anyone wondering @14:51, Kenji SUBTRACTS the Change in NWC because it is a negative value, and subtracting a negative is actually an addition. Because technically, a DECREASE in NWC needs to be ADDED to calculate FCFs.

[@caitlynlazzarini7038]

So if our own individual change in WC is positive then we would +change in WC not subtract?

[@alisherzhakaibekov1620]

You are right. He seems to have made a mistake

[@powerhouseinco9664]

also why does he add the growth rate for the TV?kzbin.info/www/bejne/bWjbnKijpc6iapo

[@olayemitemidayo9023]

@@alisherzhakaibekov1620 He did the right thing. When you have two negative signs, one turns over, and they add together to make a positive.

[@nasirhalimah7021]

@@olayemitemidayo9023 adding two negative values will still give negative unless you multiply. I guess he made a mistake on that part. More so, increase in current liabilities means that business has more short term cash available, while increase in current assets (inventories and receivables) means that less cash is available.

[@hersey1999]

Spent the last couple of weeks practicing DCF, now I feel comfortable to attempt to construct a DCF from scratch. Thanks Kenji!

[@dn.andresmunoz3008]

This bear market is a prime example of why we should have a strong foundation built & cash position in our investment portfolios.

[@ronaldjohnson1805]

I always keep emergency cash for expenses and more to take advantage of dips

[@raymondalvarez1994]

Many investors try swinging for the fences on high-risk growth stocks or crypto, without building a strong foundation first.

[@dn.andresmunoz3008]

@@raymondalvarez1994 If you can handle the volatility and invest in great growth companies, there is nothing wrong with that.

[@raymondalvarez1994]

@@dn.andresmunoz3008 well, most investors just can't handle the volatility

[@dn.andresmunoz3008]

@@raymondalvarez1994 Howard J. Alexander. A U.S regulated investment manager is a good coach. He advised me and I kept emergency funds for buyng the dips. You should only be taking out what can be taken out during downturns. Do not be tempted to sell. All that you invested over time especially during upward trends will be lost.

[@KrishnaShah-hp7su]

You should've also educated us about the Assumptions and all

[@TriMinhNguyen-le5rj]

I think assumptions may be based on nature of industry and company so it is quite hard to explain through some videos.

[@m4a1gaming69]

Or else use forecast formula using weights in another column

[@thesnackbandit]

Only takes decades to do that 😂

[@vladislavemelianov3130]

Kenji, thank you for all your efforts and knowledge that you give to many people. I am sure that you are an example and a motivator for people who want to break into this industry. By the way, as a further idea. Would you like to make a video about the LBO model? I am sure that many people will be interested.

[@florianrec4913]

yeah pls

[@justinlovro8301]

Would love to see an example paper LBO model or even a more advanced one

[@nton3845]

My guess is that it is a retail company based on the high level of operating expenses. Great video, thank you; it is helping me to complete an assessment for a position I am interested in

[@Roy-mk9zl]

Even telecommunications have high expenses...

[@davidmelonakos6565]

Best explanation for this tedious subject that I've ever seen!!

[@edgargaspar2248]

Dude, you are a life-saver and a great teacher!! Thank you!!

[@Mad1080]

Super Super Super.... Well explained.. Calm, cool, and with patience... make many more videos of DCF with hard way and practical knowledge and also provide excel sheets

[@RaltahookCrafting]

Just landed on your channel, just fron this video you already sold me your Valuation Course, keep up with the great content!

[@KenjiExplains]

Awesome! Thank you!

[@AntonioLopez-ds5so]

Hey, Kenji, awesome video as always. Thanks especially for this part 2:03 where you explain how to project the revenue in more detail. I am learning financial analyst and I struggle a little bit with some industries because I find hard to identify the revenue drivers and the revenue items. Keep it up, brother :)

[@bodgukalism3]

I literally love you. Thank you for all the hard work.

[@user-xo6kc6zp3r]

thanks Kenji, this is a perfect guide to the valuation project i have at school

[@olayemitemidayo9023]

God bless you @kenji. This is a blessing to me personally

[@productivelife]

Better explained than my 3 years in uni😂

[@balaramsprasad]

Super Video Kenji, Its literally Learn with Kenji now. A lot of takeaways from your videos. Expecting more of these types. Thank you

[@alejadroigoyanes]

very good but u need to make a full video in more detail please! this just scratches the surface

[@JD-mo3ws]

Hello Kenji! Around the 14m mark: I think we SUBTRACT increases in NWC to get from NOPAT to UFCF! Increases to liabilities represent cash INFLOWS rather than outflows, so the formula should be [-(F18-E18)] for cell F17, for example. Otherwise a great video! Thank you for sharing!

[@xiaowenliu2964]

I agree

[@king3650]

8:27 Why did you multiply by 360 to get the days outstanding values instead of 365?

[@ahmeddilshad4828]

Kenji hats off for you brother ❤

[@kuralaysaimassay9813]

Dear, Kenji! This is my first time commenting under KZbin video! Thank you a lot for your explanations! You helped me a lot on my thesis diploma project!

[@KenjiExplains]

Happy to hear that! thank you for watching the videos :)

[@HankTheTank23]

When you calculated Days Sales Outstanding, Days Inventory Outstanding and Days Payable Outstanding, technically you were supposed to use the average of the pervious year and the current year's balance sheet figure.

[@KonstantinosPanetsos]

The company is costco wholesale corporation the statements match and the stock was around 360$ when the video was published. I have a university project on costco thats how i noticed

[@Roy-mk9zl]

He took 3% growth rate for the industry but retail was projected to grow at 9%. Can you please put some colour on this?

[@Jagicheru]

Thank you for this, you have made it very bite size, enjoyable.

[@camlex6310]

Really helpful!! Breaks it down so clearly

[@shalabhmisra9073]

Kenji, thank you for sharing this. Very helpful. Do you have any video that educates about building a financial forecasting model? I am looking to learn how to project - Revenue, Production, Cost of Revenue, and Cash Flow for the next 3 or 5 years.

[@faisalym]

Thank you Kenji. Very useful.

[@WillDawson-fh6ky]

Hi, can someone please explain. I'm very confused as a I feel Kenji may have mixed up the EBIT and the EBITDA around 4:00-5:00. Is it not the EBIT that is equal to Revenue - COGS - Operating Expense not the EBITDA?

[@afsanehbozorg2001]

Kenji, it was very useful! thank you

[@yolsolano]

You are the best!!!

[@abhirajak1851]

You will end up a million subscribers

[@luisnoronha2297]

Tks for the video. One quick question. In the WACC tab the equity is listed as 214,560 but in the balance sheet tab the equity is listed as 18,078. Can you explain why the big discrepancy ?

[@fassmo]

Does anyone have an answer on this?

[@princedennisjr6246]

@@fassmo Yeah, confused about this as well.

[@user-yv6eo7io8s]

This guy has my heart!

[@ibrahimkukandaka]

Thank you Kenji.

[@Soarin8]

Great Video, thanks for sharing!

[@grazielalindahl6236]

Your videos are amazing! Easy to follow and organized. Thank you!

[@RohitThakur-en7qw]

Please make a video on Precedent Transaction Analysis for Valuation

[@balancedthinking5005]

Thanks, Kenji it's a great video. I have a few questions. How do you calculate the beta in PE? What's the growth rate of equity based on? The current value may be based on the 10 year of today but as an investor don't we need to project where the 10 year will be in the future? How do you adjust for inflation in a case when real yields are negative? For the expected growth rate do you use nominal growth or real growth? Why don't you use the revenue growth of this particular company for the growth rate? What's the expected market return based on?

[@solomonbhandari-young4154]

Kenji always on point

[@hisokaamorou4211]

Salute to you Kenji!

[@kimnganle9553]

Thank you for making such a simple, easy to understand video. It really helps me a lot. Thank you!

[@alvareza3]

For days outstanding. Why use 360 and not 365?

[@MarqusAvalos]

360 is the standard in the banking and finance industry... it's divisible by 12, companies don't work 365 days a yr (holidays), etc.

[@Joy_Christo]

I did exactly the same thing. All the values were right but I got the sensitivity table wrong.. I use a MAC, Is there something else that needs to be done to paste it as values?

[@udayteja6595]

Thankyou very much for the great content.

[@i.HeshamHassan]

It's really a great effort, thank you very much, I benefited a lot from you Thank you again and wish you all the best

[@KenjiExplains]

Glad to hear that!

[@shraddhasagwekar979]

Thankx Kenji sir

[@willzinner8813]

been waiting for this one thank you sir

[@andreugiro2807]

I needed this type of video! Thanks man!

[@KenjiExplains]

Glad you liked it!

[@khanhngan4678]

Thanks Kenji a lot

[@xfzhou4597]

so awesome，so useful！thank you so much!

[@liamdillon9465]

Damn dude this was awesome

[@ArtOfLife.]

It's a retailer you're analysing here, Costco to be exact.

[@andymarci6766]

Great content MR!

[@financialedgetraining]

Very informative video! 🧐

[@ykn7018]

great as usual, Kenji. A question. when you calculate the Enterprise free cash flow you seem to exclude interest expense. when you calculate the share price / equity value, you seem to also exclude interest expense. So is interest expense irrelevant to both the firm's free cash flow as well as to equity valuation?

[@ShameerTalk]

Thank you so much, could you make a video on the Cap table?

[@MJ-cg8vp]

Hi Kenji, where/how did you get the total equity value at 17:21?

[@daniaabuajaj1884]

THANK YOU

[@tesseractharpy6138]

At 13:19, would the amount differ in hundreds? Because I followed your step, and drag to the side with proper lock on revenue based on column, but it shows different in hundreds, H6 you got 1326, I got 1523.

[@elliottmeuer8221]

me too

[@YogiKharade]

Can you explain how did you the discount rate for forecasting the revenues for the FCF

[@benjaminli3808]

How are the projected growth rates per year often set?

[@jimd1617]

thank you 🤝

[@andychavez]

I wish you could explain what you mean by "model out each line item" in making revenue growth projections at 2:00. I hope you can provide as some sources how to do about it. Thanks.

[@박이레-q7g]

This was mad helpful. Thank you so much!

[@KenjiExplains]

Glad it was helpful!

[@mayidgallo9052]

What revenue growth or which statement can be considered for a pharma company?

[@xX3laal9amtXx]

You are smart great gentleman

[@HariKrishnan-yk3ik]

Can u make a video about Lbo model pls

[@seanlee595]

Hi Kenji, to answer your question, my guess is some type of online subscription company. Given the huge amount of cashflow, is it Netflix?

[@TheInfernalRain]

Really great video. But link for excel file not working, can u pls reupload it somewhere?

[@mclovin7159]

Hey Kenji! great videos.. I want to ask you what laptop would you suggest to perform all these task for a ms in finance student which laptop would be the best?

[@kingo_of_bingo]

Thank you for this great video. I was just wondering how did you get the growth figures? On what did you base all of these assumptions?

[@Roy-mk9zl]

Is it okay to take company's projected growth rate from the guidance for revenue projection? And I am really confused about the growth rate Kenji used while calculating the terminal value.

[@TheJaebeomPark]

excellent!

[@yassineouzlifi1902]

Hi, where are you getting the equity value from in the WACC tab ? I.e. 234,550 This should be the value of equity from the Balance sheet, isn't it ?

[@Sky_Hustle]

That is most likely the market cap of the company on the day he put this together(2022-07-02). When calculating WACC, the market value of equity is typically used in the formula.

[@DigvijaySharma574]

Thanks for such a informative video. Can you mention name of company whose valuation you do here

[@santoshchoudhary908]

Thank you Kenji, It really helped. I noticed you are using Depreciation and Amortization (D&A) for calculating capEx. I think we should be only using Depreciation not amortization. As amortization contains intangible assets like copyrights, licenses.

[@tf285]

Amazing video. I think you made a mistake when calculating the CAPM, you didn't subtract the Risk-free rate at the end of the CAPM formula. B(E(RM)-RF). Someone, please correct me if I'm wrong.

[@zachtrisler9248]

He used the market risk premium, which is equal to the expected return on the market minus the risk-free rate. So, it's the same number.

[@krishnaNishad138]

how do you find revenue growth rate of future ? can you explian please

[@tanveerabbas3271]

you are best❤

[@tomisweep6665]

I am forever in debt to you

[@fozilkamolitdinov7112]

hey bro, everything is fine and understandable but in Net working Capital you took three indicator for current assets, but in the data there were actually 5 if I am not mistaken. My question is why did you take those three?

[@moonheekim3882]

Thank you so much for your kind explanation and excel files!!! It'd be a greatttt help! I have a question though. Reg. Fixed Asset tab, I usually look for Capex amount from the cash flow chart.. but in your case, you did Ending PP&E - Beg PP&E + D&A. In this case, it doesn't match with the Capex amount from the cash flow. Am I doing something wrong?

[@aspiringassetmanager4707]

I was just thinking about you🤣and you uploaded a video

[@Zuz1011]

日本語での字幕があるととってもとっても助かります！！！ ご検討ください🙇

[@syt4453]

Hello Kenji. Nice video but I have a question. If you pay $100 to your payables, that means the change in net working capital will increase, and thus decrease the cashflow by $100 before discounting in the DCF model. Later on, when calculating equity value from enterprise value, we add less cash in because we paid to the payables. So, it looks like there is double counting of the $100 we paid. Once it deducted the enterprise value in the DCF due to net increase of working capital, and again reduced by $100 when adding (less) cash to arrive at the equity value.

[@lannytohjaya4164]

Hi Kenji, good explanation but why the EBITDA and EBIT the answers is different when using calculate using the formula?

[@Pakistan_studio560]

Can you make the video on bank reconciliation statement using excel

[@kangruiong9196]

how do u justify calculating the percentage against revenue for the components under current assets and liabilities?

[@Toby-bi8ug]

Fantastic tutorial, helped me revise for my interviews! I was just a bit confused as to why you were using a levered Beta in the WACC to discount unlevered FCFs? I would've thought that modelling the added risk of debt would entail discounting levered FCFs with a rate that has a levered Beta? Wishing you all the best.

[@scuffed_derivative]

Levered beta is the market risk, which is why it’s used in the cost of equity. It’s the cost to shareholders. The stock price variance will always take into account debt risk of the company. Using unlevered beta wouldn’t make sense as that isn’t the true cost to shareholders

[@vittoriovalerosalim7779]

is there like normal range for WACC percentage?

[@michael02468]

Hi Kenji, why doesn't the formula for calculating CapEx match the CapEx on Cash flow statement on fixed assets sheet? Why did you calculate your CapEx instead of using the CapEx number from Cash flow statement? thanks!

[@matteobedda7712]

very nice video. thank you. Could be the financial statements of retailer company ?

[@KenjiExplains]

It's Costco :)

[@rukhsaarp5013]

Hello can please explain how did you get 10% revenue growth in 2022E and so on

[@LoveU_Allthetime]

If the tax rate is different each year, when calculating the WACC, which tax rate does it take? Can there be multiple WACCs based on the year?

[@kangruiong9196]

for the debt, did you take an average from all the years?

[@ludovicivan7679]

thank you thank you thank you

[@hamzarashid4306]

Hi, I think there was an error in 2:34 - the tax projection was 21% which I assume is based of the average of the actual tax% of EBIT per your approach to the COGS and SG&A projections. However, 21% is not the correct average but 23.4% is the correct average. Please let me know if I have misunderstood something!

[@GHOST139official]

Why would you use the average tax rate? Just look up the current tax rate?

[@aashitajain1028]

Hey @Kenji why have we not included operating income and preopening expenses while calculating FCFs?

[@samuellaary7123]

AWESOME