文档介绍：Discounted Cash Flow (DCF) Tutorial Part II
Wednesday, February 7th, 2007
Recap from Last Week
Basic Underlying Principles
Time Value of Money (A dollar today is worth more than a dollar tomorrow)
Present/Future Value
PV=FV/(1-i)^n
FV=PV(1+i)^n
Opportunity Cost
What is a business worth?
A business is worth the present value of the expected future cash flows of the business.
Ex. Target Corp (TGT):
$60 Share Price
x Shares Outstanding (mm)
= $51,533 Market Capitalization or Market Value of Equity
Recap cont.
What is Free Cash Flow?
Net e
Add: Depreciation
Less: Capital Expenditures (CAPEX)
= Free Cash Flow to Equity
Basics of DCF putation
Forecasting
Tonight's Objectives
Screening panies
Where do you find the financial data
Introduction to the DCF Model
Example of ‘how to use’ the model
Dell Inc.
Currently trading at $, with a
Market Cap
Screening panies
Web-site to use: Yahoo Finance
Web Address: finance.
On the left margin click on ‘Stock Research -> Screener’
Initial Screen Criteria
Price to Earnings (P/E) ratio no greater than 20
pany’s Return on Equity (ROE) should be greater than or equal to 10%
Where to find the data?
On-line
Edgar
(ar/)
Yahoo Finance, or Reuters
File Looking for?
10-K: Annual Filing
10-Q: Quarterly Filing
Important Sections
Part I: (Business/Risk Factors)
Part II:
Management Discussion and Analysis of Financial Condition
Consolidated Statements of Financial Position
Introduction to the DCF Model
Four main sections of the DCF Model
Historical Values
Future Projections
Discount Rate & Perpetuity parison of the Fair Value to the Current Market Price
Variables to change within the Model
‘Blue’ cells change
‘Black’ cells DO NOT change
Example: ‘How to use’ the Model
Six Step Process
Screen for pany
Find the financial data
Input the historical data into the model
Make future projections based upon research and information within the 10-K/10-Q
Apply the Discount Rate & Perpetuity pare the F