Advanced Discounted Cash Flow (DCF) Valuation

This session focuses on the different approaches of terminal value calculations. Participants will model a 2 stage steady state terminal value and understand how returns fade to WACC over time.

Key topics

• Re-cap of free cash flows, and how to discount and make the mid-year adjustment when the deal date is not at year end
• Understanding how to correctly model the steady state cash flow
• Traditional terminal value approaches and pitfalls in long term return and reinvestment rates
• Understanding the value gap concept
• Disaggregating return on invested capital – profitability and efficiency
• Alternative terminal value approach: value driver
• Building a two-stage steady state terminal value model
• Sensitizing the WACC for different capital structures
• Building a graph of the optimal capital structure analysis