Discounted Cash Flow | DCF Model Step by Step Guide

[@KenjiExplains]

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[@dushyantguntukwar6342]

what if the growth is not stable how to calculate make a video?

[@jameszhang4798]

Kenji, for the tax rate, do I go in the SEC fillings to find that number？

[@yuji25290]

@Kenji Explains Are those free cash flow past data in the last example? Which one is the latest cash flow? year 1 or 5?

[@mxdrives]

I am a recent graduate in Finance and I have to say that the way you explain things are far better than 99% of the professors I had. I am so thankful for your content. Please keep up wonderful work, Kenji!

[@gaelimadeddine3139]

I agree he explains very well, but maybe watching a summary after getting a course helps. I am not sure that someone completly stranger to finance would understand. This a a good way to revise after getting a full course. So don't be too harsh on your former teachers. ;-)

[@CarlosTorres-px6op]

Probably you've got an interview in two days, so you're paying attention now, while didn't give a fuck when your teacher tried his best to tell you what terminal value was.

[@abc33944]

professors like to make things sound complex ,suits there ego

[@ruiqingqiu9010]

Got an assignment of DCF without having any classes before. Tried a few crash course videos, only yours taught me the real thing in a short time. Thank you so much!

[@KenjiExplains]

Thanks for the nice comment means a lot 🙏

[@australianpatriot]

@@KenjiExplains how did u find the beta, cost of debt, etc?

[@culifabrizio1479]

@@australianpatriot bettas are in the internet, then you leveraged to your company

[@Isither]

The fact i am this person right now and I have to submit the assignment of DCF by Wednesday is crazy …this video was just what I wanted.Thanks beyond words ❤

[@pranjalprakhar7737]

​@@Isitherare you asked to do it in your university/college/school?

[@KennedyVerbruggen]

Diversification is the secret to optimal performance. This is why I have my interests set on market sectors based on performance and projected growth, such as stock, EV sector, renewable energy, Tech, and Health. Keep investing regularly and you'll be blown away how much it can change in a few short years. Here's to $1 million and to FIRE

[@mariahudson9939]

Dealing across multiple asset classes can reduce risk more effectively than putting all of your money into one. If you don't understand finances properly, see a financial consultant.

[@NorthCarolinaForward]

True. My portfolio was diversified across several markets with the help of a financial planner, and were able to achieve over a million in net profit among high dividend yield equities, ETFs, and bonds. It is vital that you have a variety of exposure, including in firms that are currently generating cash flows.

[@vanessahopkins-g5y]

You seem to know the market better than we do, so that makes great sense. Who is the guide?

[@NorthCarolinaForward]

Her name is REBECCA NASSAR DUNNE . Just research the name. You’d find necessary details to work with a correspondence to set up an appointment.

[@type-r3x]

I just curiously searched her up, and I have sent her an email. I hope she gets back to me soon. Thank you

[@nicklaslouie5693]

You’re offering a lot of value through your channel. Good work.

[@KenjiExplains]

Thank you 🙏

[@Asw_2004]

@@KenjiExplains At 5:14 why isnt the EBIT multiplied by (1-Tc) which is -75% or 0.075

[@DonAlacran4]

Great video Kenji! You essentially condensed what I got out of an entire semester long course in corporate finance down to 20 minutes... super impressive! Your tone and pacing really kept me engaged, and the breaks in between excel calculations and concept breakdowns were so well done. Really looking forward to your next video man, keep it up!

[@KenjiExplains]

Thank you for the awesome comment means a lot! 🙏

[@orlandogomes7466]

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[@KenjiExplains]

📊 Learn a full DCF here: kzbin.info/www/bejne/bWjbnKijpc6iapo

[@abboudjr]

You know why your video works?Because you're not cocky and trying to show off your knowledge, but instead you're actually sharing knowledge.I love it...Keep up the good work.

[@xX3laal9amtXx]

Wow, I studied finance non of my professors had explained it as clear as you did. You are brilliant in delivering knowledge and ever thing ❤️

[@KenjiExplains]

Haha thanks for the nice message means a lot! Glad it was helpful :)

[@gaborscharioth8270]

When you did the Discounting Cash Flows Calculation the WACC was 7.5%, not 8% probably not visible because you decreased the decimal. Took me a second to find out what was wrong with my calculation. Thank you for the video, helped me a lot.

[@emmanuellcho4115]

Caught that too. Thanks for confirming

[@jeremiahkorakali4587]

Great video Kenji. I thought you should have mentioned why the terminal value was also in the same year as the last forecasted cashflow year. For those who wondered why, it is because the terminal value is calculating the present value of all future cash flow based on the assumption that the last projected cashflow year is the present time. This is adjusted by discounting further back to actual present time along with the other forecasted cashflows.

[@KenjiExplains]

Thanks for the input!

[@jamesstramer5186]

Thanks man. I really love the fact that you give a brief overview at the start of every video which really helps connect each concept to the whole.

[@KenjiExplains]

Thank you!

[@aakashagarwal9827]

Best DCF explanation I've seen so far!!! keep making more model explanation videos. Thank you so much

[@KenjiExplains]

Thank you! More in the pipeline!

[@linelogic1699]

You are one of the very few who explained why D&A is added to the FCF calculation . Great Video for non finance background people like me.

[@KenjiExplains]

Thank you! Appreciate the nice comment :)

[@shmulyseligson]

I have recently started in the finance industry and even though I didn't understand all the technicalities, I was able to follow along and learn the formulas and process of a DCF analysis. Thank you!

[@feastflavorswithdipti4067]

hello kenji, i am CFA and seen your vidios for brush up ..its worth. keep it up.

[@Maannggoo]

Wonderful explanation! I’ve never actually felt that i got the DCF model before this video. Now everything is well organized in my minde. Thank you for such an amazing effort.

[@jprak123asd]

outstanding job explaining the different valuation methods, making complex concepts easy to grasp. His clear explanations and constant smile made the session both informative and enjoyable. Thank you, Kenji, for your expertise and positive energy!

[@DylanSMith-m3x]

Awesome video. It's been beaten to a pulp by now, but you really do explain this better than most finance professors. Haven't had to do one of these in a long time with current role, and brushing up. You'd be a killer teacher.

[@mayurbhatia2250]

I would take a moment to appreciate you to put and explain these contents. Please keep it up doing, you are very good at this.

[@jayhoe8174]

dude, this is literally the best video on this topic out there. You just made me pass my interview!

[@KenjiExplains]

haha that's awesome man congrats!

[@jenniferpreston3080]

I have watched a couple DCF video's, this video is one of the better explanation. He is fast, so I had to watch it a couple time. The excel file was very helpful.

[@happyminds5]

Thank you very much Kenji...the best DCF video on KZbin so far...!!

[@programmingjo]

I've never dealt with Intrinsic Valuing methods in my life. This was very infomative and useful. Thanks.

[@toniweigl9783]

After the third video of yours today, this is so amazing, I have to do a valuation of a company for university and I have the feeling, your videos are so much more valuable than anything I‘ve learned so far. Thanks a lot, really appriciate your work!

[@toniweigl9783]

@@Pens4Life85 I am studying at University Cologne in Germany. What exactly do you need?

[@toniweigl9783]

@@Pens4Life85 let me know how to get in contact

[@ankitbulsara6875]

This is the best explanation of DCF model on youtube.Thank you Sir...

[@nandoborchardt4327]

I have a job interview for an M&A position soon. I did not know much about the topics you discussed. I have searched long to find a good ressource on these subjects and your video is perfect. If I could like it more than once I would haha. Thank you so much. You earned a new subscirber!

[@KenjiExplains]

Thank you for the message! Best of luck with the interview 👍

[@monkeymaster6489]

Excellent excellent excellent video man. Best explanation of DCF I've seen. You have a talent for this man.

[@KenjiExplains]

Haha thank you man, glad you found it useful!

[@sdave6259]

Best crash course ever...so much easier to understand than my finance course! Really, Thank you!

[@KenjiExplains]

Great to hear thanks for watching it means a lot! :)

[@rolandjambaya8332]

@Kenji Explains Wow! Lets just say, not all Teachers need to go to a Teacher training course or college! I have just watched your videos on Valuation in preparation for my assignment, thank you very much! You made a very complicated subject, appear so easy! Thank you, very clear good pace, no unnecessary jargon. Thank you!

[@OA-hm9xn]

This is possibly the best explainer I've seen

[@MarinaALcala-vr8in]

Thanks!

[@zachgoll]

Have been looking for a video like this for a while! Really nicely done, very helpful.

[@KenjiExplains]

Thank you!

[@gersonvarelalopes5207]

Time well spent mate! Thanks for this content!

[@method341]

Dude, that shirt is SICK! Never seen that color combination in a Polo before.

[@lskknl10]

Purchased career principles. Thank you for the course. It is very clearly explained step by step easy to follow. with start and end excel files. It's better than big name ones. customer.

[@KenjiExplains]

Appreciate you commenting this :)

[@johncase9153]

You have a very nice presentation. I use a Model presented by P. Dorsey, who was with Morningstar, that looks at equity instead of equity & debt. The essential inputs are next year's free cash flow (FCF), FCF growth rate, discount rate, & perpetuity growth rate. I look for companies that have very stable free cash flows for periods of 5 to 10 years ($KO). I have found that you can apply linear regression analysis to project next year's free cash flow and can estimate the 95% confidence interval. I estimate the FCR growth rate & uncertainty. I also estimate uncertainty for the discount rate & perpetuity rate. I use the First Order Second Moment Method (FOSM) to propagate uncertainty. I obtain a probability distribution function (PDF) for the intrinsic value of a stock, and look to see what the probability of failure is if I purchase the stock at its current price.

[@aidanmilla5699]

Great explanation, thank you

[@chshree007]

Learned more than my lectures here! Awesome Kenji!

[@veliko0000000]

Thanks

[@vivekkn3609]

Just a small mistake you have done. The FCF calculated from EBIT must be EBIT * (1- Tax rate) but you calculated as EBIT * (Tax rate). Which is True?? By the way the video was super awesome and was able to lean so easily.

[@subhadipsarkhel6727]

You've not only gained a subscriber but a fan

[@KenjiExplains]

haha thank you, glad you liked it!

[@pratima1rajguru]

Thanks Kenji, what a brilliant non cocky way of explaining tough concepts

[@KenjiExplains]

thank you!!

[@vikramadityarathore97]

Hey man kenji excellent work , you simplify things in finance so well.I would be extremely grateful if you make video based on how do we create assumptions for financial models.

[@alexandredelcommune5316]

videos amazing, your Excel tutorial videos helped me pass an Excel hiring test

[@janoshajdu4552]

Hi Kenji, would highly appreciate if you could do a video about how to make the in-depth EBIT calculation for the projected years, based on historical data and CAGR. (as shown at 19 minute)

[@dineshlutchmun8534]

Exactly i need that too

[@AugustClausson-b8l]

Hi Kenji, Its August, maybe you remember me from Rosey? Great channel man, good to see you're doing so well. The DCF explanation helps a lot. Keep it up my friend.

[@edinya6934]

I love what you providing to us thank so much! Continue to do so God bless you.

[@kongsokheng3087]

I am a finance student and take investment course this semester. Thank you for sharing this, it helps me alot with my study.

[@KenjiExplains]

Awesome to hear thank you for watching! 🙌

[@kabilanv6453]

It's a great video, with a clear-cut explanation. Thank you very much :)

[@albertoalbornoz381]

Very good video, I wanted to see why in the Excel calculation at minute 5:00 you subtract Capex and Non-cash working capital. I understand from the methodology explained above (minute 4:00) that the formula should only consider Non-cash working capital negative. It would be great to know your feedback.

[@neerajtatikola4797]

Great refresher for me who had learned this about 10 years ago

[@Oscar-yo3jy]

Hi Kenji, Great content as always! Could you possibly do another video on DCF valuation using forecasted free cash flows? How would you go about predicting the future cash flows of a given company? I understand that it may be a lengthy process, but for those trying to break into investment banking or investment management I think it would be really informative. Thanks!

[@KrishnaShah-hp7su]

yes this is much needed . Please Kenji if you noticed this cmnt consider making a full video on DCF

[@camlex6310]

Really clear explanation! Another great video, thanks Kenji

[@MrSilenxe]

That video was just amazing. Thank you, now i can say that im pretty familiar with the DCF model in an interview

[@srikanthkanagal1]

one of the best concise videos i saw. Thanks a lot

[@jackieyip]

Wow, you have explained far better than my professor on these finance calculations.

[@Frank-mw9dl]

the hardest thing to be honest in a dcf is to properly forecast cash flows , which is the hardest thing in the world tbh. Thats why analysts use the same math but different forecast methods and com up with different intrinsic values in other words buy sell hold recommendations.. thanks for your video though pretty cool and insightful

[@SimangaMdluli]

note that the FCF formula at 3:57 is correct because it subtracts CAPEX, however the same formula at 4:22 is incorrect because it adds CAPEX, I believe this was just a typo since you correctly subtracted CAPEX when you did the calculation on excel.

[@frankvdnieuwenhuizen4602]

Thank you very much for this very clear explanation and highly instructional video. I'm a enthusiastic beginning investor with basically no knowledge of these kind of processes. Your videos make stuff a lot more easy and therefor much more fun. Keep up the good work.

[@omaralami1278]

tbh, you explain better than my professors. Thanks and keep going!

[@KenjiExplains]

lol thank you!

[@erendirmilli3323]

Very nice work Kenji!

[@janice9001]

Thank you so much for this informative tutorial, you've just saved my life for my finance project!

[@KenjiExplains]

Glad I could help!

[@LuettiJ]

Great Video! Unfortunately the Download of the Template isn‘t working due to „Automated Google querys blocked By Google to protect our Users“😢 Could you fix it?

[@tanwirarman4251]

Hello Kenji, at (4:21) the formulae has Capex added to calculate FCF, while you deduct in actual calculation. Just highlighting. Thanks for always making simplified finance videos. :)

[@davidli3742]

pretty sure it should be deducted. Surprised we're the only ones who caught onto this

[@corradoforza]

Thank you for the video! I really appreciated it. Video suggestion: make a three statement model and link it directly to a DCF evaluation model from scratch

[@dhruvpatel7637]

Learning about this in college right now, nice video to help me recap/summarize what I learned. Great help!

[@dumaoctavian8523]

11:33 where did you get the numbers for ebitda and Fcf here?

[@colinmahon887]

Super Informative Video Kenji!

[@KenjiExplains]

Great to hear thanks!

[@excelmaster8651]

Thank you for taking the time to prepare this video. it helped me to grasp a good knowledge in the area I was struggling.

[@kennethchong4385]

Well curated, depth, pace and knowledge impeccable.

[@nidhinahata4262]

Hi Kenji! Just wanted to point out a typo - at 4:21, Capex has been added but it should have been subtracted.

[@albertoalbornoz381]

Very good video, I wanted to see why in the Excel calculation at minute 5:00 you subtract Capex and Non-cash working capital. I understand from the methodology explained above (minute 4:00) that the formula should only consider Non-cash working capital negative. It would be great to know your feedback.

[@nikhilpachauri5761]

Thanks for explaining it with such ease.. It would have been great if I had you as teacher 10 years back when I was doing my MBA

[@Tobisuffern1231e]

Thank you so much. I'm getting into M&A and this has been incredibly helpful

[@Milton-ij9eg]

GREAT CONTENT! Thank you Kenji.

[@arjunmahendra4408]

Are the values in the sheet the 10 year averages ?

[@davidcayuela5536]

Amazing video Kenji! Thanks a lot!!! It would be amazing if you do a second part of this video analyzing a real and famous company to watch how do you find all the numbers and how it works in the excel. Thanks and greetings from Spain! Great content! 👏🙌

[@KenjiExplains]

Thanks for the idea, will look into it! Un saludo David

[@anthonymunoz9148]

Yes please!

[@DCphoenix]

Hi Kenji. Fantastic DCF model explanation! Been looking how to calculate and understand DCF model for a long time! This was the best video for it! One question: Around 11:15min. The numbers within the Period section (EBITDA & FCF), are they also assumption, or number calcuated from the assumption above? I'm just unsure if I was to do a real analysis, how should I project future EBITDA & FCF within the "terminal value" section? Thank you!

[@svenkats71]

Thank you Kenji -- the templates are easy and simple -- you explained it very well and Of course, I had a great learning

[@almadeunrebel]

thank you for making your model open source

[@TN-wi6ge]

Thanks Kenji for a great video! You made it really easy to understand! It would be wonderful if you make a separate video about how assumptions and sensitivity analysis!

[@KenjiExplains]

Thank you and will keep that in mind!

[@ignaciopazgarcia5370]

Amazing! Very well explained!

[@KenjiExplains]

Thank you 🙏

[@darshanpatil992]

great explanation helped me in college fest and i won second prize .

[@kugankumar202]

Thank you so much for this Kenji, this was a great resource to learn from and I am very grateful to you!

[@cuelbkk]

Excellent video. Simple and to the point

[@willzinner8813]

class video man, so easy to understand love it

[@linelogic1699]

In the slide at time 4:21 , Capital Expenditures is shown as 'to be added' or '+' to the FCF calculation. It should be subtracted or '-'

[@KenjiExplains]

thanks for pointing that out apologies for the sign mistake, just put it in a comment for people to see!

[@gregoryevem]

you are awesome Kenji, im brazilian and i like a lot your video

[@rafabranez]

Very nice video and excellent explanation! Thank you!!

[@williama.rivera9414]

Good and precise explanation. Thank you for teaching

[@stev6072]

Thank you, Kenji! What a good explaination!

[@vaishnavikp6788]

Such a great way of explanation....... Thanks alot for this!

[@jaynm26]

Keni, thank you for this videos and all your videos I have not yet seen but I am going to see.

[@jordanhopkins309]

I believe this is a real informative & great video. It also would’ve been helpful if you through a 10K to show where/how your getting the info to make these calculations. Thanks!

[@AleksanderKowalski-s2m]

Hey I know it's basic video on DCF, but when you do terminal value you have to adjust for growth and required investments in the formula. You take the NOPAT and you multiply it by (1-g/roic) and thats what you put into the formula for terminal value instead of FCF. When it comes to multiple it's simply an incorrect method. It's no longer a valuation, but pricing. Also you can't based ev/ebitda multiple on some kind of average since risk-free rate changed. I know a lot of people do it, but those are the ones that loose money. Yes it's easier, but valuation is worthless.

[@amyazaire1114]

Thank you Kenji! Keep up the great work!

[@KenjiExplains]

Thanks for always supporting! :)

[@fazalrehman6375]

Great! I got lots of things clear through your video.

[@TheKki2]

Your content is brilliant

[@andrewsalmon100]

Thanks very much. Beautifully presented.

[@francescoguidi8830]

can you do more of these videos ? they are really helpful