Discounted Cash Flow (DCF) and Other Valuation Methodologies

What you will learn

• In this course, we?ll look at the various methods for conducting DCF valuations (no growth, constant growth and variable growth), source of input values and when each is appropriate.
• We?ll explain the rationale for using free cash flows versus other measures of net resource flows (e.g. dividends, earnings, EBITDA, etc.) when valuing a firm or its common equity. We?ll also learn how to calculate free cash flow (to the firm and to the equity holders) using information from corporate financial statements
• Next, we?ll discuss the factors that would need to be factored into a free cash flow projection for a DCF valuation, including but not limited to issues impacting sales growth, margins (net and operating) and leverage (operating and financial).
• We?ll also cover the macroeconomic, industry sector and company-specific factors that color the context for cash flow projections (e.g. industry/product lifecycle or competitive analysis).
• Next, we?ll learn how to calculate a terminal value for a DCF valuation and discuss issues regarding the sensitivity of a terminal value to assumed growth and discount rates as well as a factor related to the determination of reasonable estimates for those inputs.
• We?ll also learn how to calculate the value of a firm and the value of its equity using DCF analysis given the appropriate free cash flow projections and discount rates.
• Next, we?ll discuss alternative methods for determining enterprise value and equity value based on either excess cash and non-operating assets or economic profit and invested capital.
• We?ll wrap up this course with a look at the components of the widely used valuation ratios and how they are employed in assessing relative value.
• Overview of Discounted Cash Flow Methodologies
• Elements of Cash Flow Projections
• Discounted Cash Flow Analysis
• Alternate Valuation Methodologies
• Relative Valuation Techniques

Program Overview

In this course, we?ll look at the various methods for conducting DCF valuations (no growth, constant growth and variable growth), source of input values and when each is appropriate.

We?ll explain the rationale for using free cash flows versus other measures of net resource flows (e.g. dividends, earnings, EBITDA, etc.) when valuing a firm or its common equity. We?ll also learn how to calculate free cash flow (to the firm and to the equity holders) using information from corporate financial statements

Next, we?ll discuss the factors that would need to be factored into a free cash flow projection for a DCF valuation, including but not limited to issues impacting sales growth, margins (net and operating) and leverage (operating and financial).

We?ll also cover the macroeconomic, industry sector and company-specific factors that color the context for cash flow projections (e.g. industry/product lifecycle or competitive analysis).

Next, we?ll learn how to calculate a terminal value for a DCF valuation and discuss issues regarding the sensitivity of a terminal value to assumed growth and discount rates as well as a factor related to the determination of reasonable estimates for those inputs.

We?ll also learn how to calculate the value of a firm and the value of its equity using DCF analysis given the appropriate free cash flow projections and discount rates.

Next, we?ll discuss alternative methods for determining enterprise value and equity value based on either excess cash and non-operating assets or economic profit and invested capital.

We?ll wrap up this course with a look at the components of the widely used valuation ratios and how they are employed in assessing relative value.

This course is part 3 of the New York Institute of Finance?s Corporate Finance & Valuation Methods Professional Certificate.