How to do a DCF Valuation - Real World Example (Step by Step Guide)

[@enginkizilirmak6881]

Hi How can I get this excel template to analyze it ?

[@financialedgetraining]

Hi, to access all our Excel materials, including this one, you can subscribe through our platform, Felix - www.fe.training/product/subscription/felix-subscription/?

[@damienrey1387]

Very interesting, thank you ! I just have a question regarding the WACC calculation. I have to use the DCF model several times for small companies, sometimes startups that have unsteady revenue. How could I calculate the Beta for start-ups ?

[@financialedgetraining]

It's difficult to use the CAPM model for startups. Typlically, VC funds, like Private equity work more on the basis of a return hurdle rate rather than discounting future cash flows. So a startup fund might have a hurdle rate of say 30%. Where a DCF methodology might be appropriate is where you are estimating what the value of the firm would be once the business is proven and is profitably growing. This might be five years out. Then you can estimate the value then using a DCF methodology and then discount back from that point the cash flows using the VC fund hurdle rate. So, in summary I would not use CAPM for a start-up business, but a hurdle rate return in the region of 30% to 50% depending on the industry.

[@dameskytower1]

Thanks, this is very helpful. i have a question about drivers if I can. If your evaluating a company in a country that does not have a lot of market data like overall market sales or market share, is it ok to use the GDP for the industry as a proxy for industry sales?

[@GerardK-d9i]

GDP has a lot of factors that go into it. For isntance GDP may includes the services industry which is due to grow slowly, but also includes the fast moving consumer goods which is gorwing quickly. Instead, many industries are global so I would look to global growth of the specific industry you are looking at.

[@dameskytower1]

@@GerardK-d9i Thanks alot. Your answer aligns perfectly with my thinking. I am super happy that i signed up to Financial Edge Training. Your content is 360 degrees of relevant, current and perfect for me as an outsider just trying to understand.