Discounted Cash Flow (Part 2 of 2): DCF Applied to a Real Firm
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- čas přidán 16. 02. 2014
- This video follows Part 1 (available here: • Discounted Cash Flow (... ), which reviewed the basics of a DCF Model, including how to program a basic model in an Excel spreadsheet. This video illustrates a Discounted Cash Flow Model applied to a real firm. In particular, I discuss the various sources that help inform the inputs, assumptions, and forecasts for the DCF model, including freely available sources on the web, as well as Bloomberg Professional.
Disclaimer: This video is for educational purposes only. It is not investment advice. It is not intended to recommend either positively or negatively the company that is used in the illustrative example.
The music is "Gnomone a Piacere" by MAT64 (www.mat64.org/).
Have been searching for awhile on a decent tutorial on DCF but this is arguably the best I've seen so far. Thank you Dr Greene for your time and excellent presentation.
I have watched several videos about DCF/Valuation. For me, these (parts I and II) are the best I've seen about the subject. Congrats to PhD Jason Greene.
Marco Reichert/Brazil
The best video I've ever watched! Thank you thank you thank you so much Dr. Greene for taking the time into making. Please keep making videos!!!
Mr. Greene, this is a very old video, but this was exactly what I was searching for almost a month. A real company example. Thank you for this. Really helped me in understanding if a company is worth investing, keeping in mind all this is an assumption ! Wonderfully explained :)
Mr. Greene,
This was a phenomenal lecture. I hope that you can maybe do a more indepth or advanced version of this for students like myself looking to get more technical. I think providing rationale about how one picks a market risk premium and what a discount rate really means would help. Not sure if you are still making videos. But this was great!
Thank you for helping me make sense of DCF. Its opened a new door for me, when it comes to understanding finance, and that even paid professionals can only provide estimates.
This is one of the best video I have come a cross for learning DCF Valuation. Thanks Jason Greene!
One of the most interesting discussions of security analysis I have seen.
This is the best video on DCF valuation I’ve seen. Thank you so much for sharing it!
These 2 videos were really informative, thank you.
I just completed a Real Estate and Development Certificate, one of the main topics was valuation. I wish I had seen these videos earlier. Great simple and to the point - fantastic videos (Part I and II). Please upload more.
Great video. Content and presentations are brilliant. Cristal clear explanations and self speaking exemple. Thank Jason for sharing your time to educate people!!
I consider myself very lucky to have found these 2 videos. I spent all day creating this spreadsheet and meticulously going thru the videos. Doctor Greene, you are the first analyst I've seen that isn't completely full of shit. Thank you, Thank you.
Fantastic would be an understatement. Thank you for such a wonderful video.
This video is wonderful! Dr. Greene, thank you very much.
Thank you so much! This was the best break-down with simple organization of the DCM. I was pretty lost before this. Thank you!
Loved the videos on the DCF model, very well explained. I would love to see a similar video using comparables approach.
awesome jason, you truely simplified the model..very useful for many people
Perfectly delivered ! Thanks , hope u make more videos on valuation of real companies using different models
you saved my life, keep rocking bro!
Excellent demonstration! Thanks for sharing your knowledge!
Thank you very much for creating this vid, its given me a better understand of the DCF model
Wow, thank you very much. I feel like I can actually do it myself after watching your videos!! Thankssss....
Thank you for the lesson, it was very concise and informative!
very helpful. I was able to solve my hard assignment using this video. Thank you for sharing
Thank you professor for your great explanation...
This is amazing. Thank you very much for this great video.
Great video! Thanks Dr. Greene!
This is a very brilliant lecture. thank you.
Very good explanation of the model! Thanks a lot!
Hi Jason,
How do you deal with the cell for the yield to maturity on bonds when the data is not available for companies. Lets say the bonds are not traded or simply no data exists for them (in case of smaller less known or followed companies)?
Thank you, helped me better understand the concept.
Great video. What is the caalculation that was used to calculate the Terminal Value in cell H12?
Can't thank you enough for this video!!!
Thk for your kind post, its very useful and helpful for me.God bless you and your fam.cheers
Really great video. Thank you!
thanks Jason , this is very helpful .
loved your style of explanation need some more videos on how to make valuation of stock price of the company,Thank you
Dr. Greene, thanks for this excellent video presentation. Please consider making a similar presentation using economic profit.
Quite useful. makes it so simple to understand
Thank you very much Jason. The video is so clear and informative.
I have a question about FCFF and FCFE. At 13m50s, I noticed that on Bloomberg, FCFE is higher than FCFF, does it mean Microsoft had borrowed more than repaid that year? If so, the capital structure must have changed (so WACC changes) and the same thing might happen in the following years. How can we cope with this issue in practice? Many thanks.
this has helped me understand thank you so much
A very good lesson in DCF, I truly can say that I learned a lot just from watching this. Regarding DCF just needed to ask if it's is possible to apply def on a company that's cash flow is negative? How would you valuate it in the Valuation box.
Great Video! Can i use FCF to Equity if FCF was in negative numbers for a certain company ? and if so, shall i discount the FCF to Equity still by WACC or by Cost of Equity ?
Thanks,
loved this video, thanks for sharing!
hello i am wondering what was the algorithm used for calculating terminal value and also present value, please help me i am desperate at this point
Thank you very much for this video! I am writing my bachelor thesis on this topic and i still have problems to estimate the growth rate for the short-term forecast. my company is operating in the renewable energy sector and especially here, the ebit and its capex is so unpredictable!
Video is very much helpful.....watched it in 2020
Is a your Excel DCF template available
Hello Jason, please help me out here.
I am wondering where you got that template for excel, and what softwares to use (If Any). Please let me know ASAP, thanks
This was a great video on the discount Cash flow. I was stuck in my class about this topic I have better idea what to do to with my company. thanks
how many years is the standard dcf model? in theory, would a longer (20 year) forecast produce a smaller terminal value NPV than the NPV of the initial FCF?
From where do you get the growth rate or are you just assuming that based on historical data the company will grow x amount of % / year. Just wondering since I'm doing a DCF on a different company.
Dr Greene, normally how do we determine the long term growth rate, other than looking at the forecast inflation rate?
Thanks for the video! Just wonder if you wrote any book on valuation? Do you have experience for other market like Vietnam?
Thank you for the video, sir. But I'd like to know why you used FCF instead of FCFF which is the most commonly used CF method. Is it because of simplification?
Thanks very much on your effort to produce such a high-quality educational video! Hope you can explain or provide more information on projecting free cash flow? Any systematic method for the projections?
Thanks so much for teaching me lots of finance thing
wow, very good of ppt
Dr.Greene Amazing video, amazing way to calculate the valuation based on discounted free cash flow, I had a question about your "Market Value of Debt", you have 22.7 Billion dollars , can you please direct me if this value came from the "Balance Sheet" of MSFT , if so which line items.Your teaching method was very soothing to hear and undestand.. Please keep up the great work Thank you
In this Video why didn't you use the capital structure given by morningstar? thanks for the video.
Extremely informative thank you! Are there or do you offer formal courses on stock / company valuation?
how do i account for post emplyment benefit obligation , derative financial instruments , investment properties in DCF valuation?
i m trying to do valuation for UK grocers TESCO?
Thank you. You're the best
Can anyone explain why he gives two formulaes to calculate FCF but uses the simplified version (cash from operations- capital expenditures)??
Hi jason, how can i get the excel sheet what should i do? Thx
How did you calculate the geometric average growth rate through excel ?
where can I get the template that you used in this example?
Since I cannot find it on Morningstar, what websites/resources can I find the amount outstanding of a stock? Thanks.
Mr. Greene
A difficult concept explained in a simple way . can u help in understanding how did u calculate the Geometric Average growth rate & where do we use it in DCF
Thank you so much, this helps a lot ! Are you planning on making new videos ?
Hi Dr. Greene,
Could you please explain how to determine "pre-tax cost of debt and MV of debt" for a company that has not issued bonds?
it will be 0% if its an all equity firm
Great teacher
7 years later, great vid, but who could have guessed future conditions like today's crazy market... ?
Thanks, you are amazing ❤️
Thanks, very helpful!
hii can you share the excel template?
Where do we apply the geometric avg growth rate?
Hello Jason , this looks cool . Can i know where can i get excel spreadsheet please.
Super love this video
PLEASE LET ME KNOW WHERE YOU GOT THAT TEMPLATE, I AM DYING TO USE IT. IT MAKES EVERYTHING EASIER
drive.google.com/file/d/0B_9Ooz5Y7xZFRmRjUVdIOFdpd2c/view?usp=sharing
Thanks a lot Greene
Can please share slides or pdfs of your lecture in your description link. Will be of help to newbie finance enthusiasts.
Excellent explanation of the model. Question: You subtract the Debt Value from the Firm Value. Would you not add the Cash on hand to get a true Equity Value?
Where can i get this models template Mr Greene?
nice video. Can you please make video about establishing financial forecast model ( i/s, b/s, cf)
Why would I use this over ben Graham's Intrinsic Value equation?
Teach us how u made that model and where to find risk free rate and market premium
Thanks Dr.Green for part 1 and 2 of these videos, very informative and easy to follow. Why have you omitted the deduction of the risk free rate from the market risk premium in the brackets. Calculating cost of equity using CAPM model is ke = rf + b*( rm - rf ), it appears you have used ke = rf + b*( rm ) in both part 1 and 2 of these videos.
The market risk premium is rm-rf. I have entered it into the model as the quantity rm-rf, not as rm. Therefore, there is no need to subtract rf, since I am referring to the premium on the market (over and above the riskfree rate), not the return on the market.
I understand now. Thank you for your explanation.
Excellent.
amazing video, enough detail is covered and it is explained in such a methodical manner. Question, how could I get my hands on this excel template?
same question
I made it exactly and I'll send you a copy but it'll cost you $20 to my PayPal acct.
Paul Ballas make one it's not hard
You're a jerk
Have one for free: drive.google.com/file/d/0B_9Ooz5Y7xZFRmRjUVdIOFdpd2c/view
Good stuff! It’s clean , very legible, and not have extra nonsense that I’ve seen in other ones which is just a wreck with data that don’t make sense and hard to understand.
Why not use instead the exact numbers of shares outstanding, instead of the rounding number you populated in here? That would work better, no?
Also shouldn’t these types of analysis also need a total of 10 years worth of data from what Ive read, in order to get more correct numbers and have ample sample numbers? To what extent is that correct?
Also, the DCF modeling as you performed here, the Year 0 is always the prior year (where you have the last year with completed annual numbers) compared to the present year? For example, you performed the analysis during the course 2014. So the prior year, 2013, would always be the ‘Year 0’ in this example?
And how far into the future is too far out?
How many years back is an appropriate amount of years when doing the Historical FCF data portion average CF numbers?
Neither Bloomberg nor Morningstar appear to display information as they did when the video was developed. This makes filling-in the model a bit more challenging. An updated video would be helpful.
Hi Jason - top video. How do I derive the Geometric Avg Growth Rate? I've used: =GEOMEAN(C29:32) but I recieve a #Num! error. I think it's got something to do with the minus 16 but I can't figure it out. Anyone else know?
Thank you, James. The geometric average growth rate is calculated from the cash flows, not their %Chg. Take the ending, divided by the beginning, to get the growth over the entire period, then take that to the Nth root, where N=number of periods. Subtract 1 from that last calculation. In the video, the geometric average growth rate is [(24,576/15,918)^(1/4)]-1 = 0.1147. General rule: do not use the =GEOMEAN() function on returns. You can use the function if you first convert the returns to gross returns, where gross return = 1 + return.
@@InvestmentsProfessor HI, thank you for the reply, but why is it 'to the power of n=1/4', instead of n=4? isnt n the periods? (in this case 4 years), why inverse it?
Dr. Greene. Is long term growth rate(3%) your estimation of US GDP growth rate? If I look for growth rate for some country like Japan, it would be negative. So how to set this long-term growth rate as it located in Japan?
CHEN Jintao It seems that the long-term growth rate should not be country-specific for firms doing business in a global economy.
Thank you. Jason
Thank you jason... :)
what if firms initial free cash flow is negative
Oh Thank u Thank u So much Sir...
If a company has a negative Initial Cash Flow how will this affect the model?
If you apply a reasonable growth (growth rates greater than -100%) rate to a negative cash flow then future cash flows will never be positive. Therefore, be careful that you actually forecast future cash flows in this situation, rather than simply applying annual growth rates.
thanks for the knowledge but i need a template
drive.google.com/file/d/0B_9Ooz5Y7xZFRmRjUVdIOFdpd2c/view?usp=sharing
I like the bg music :>