Question:

Walk me through how to get from Revenue to Unlevered Free Cash Flow in your DCF projections

Answer hidden.

Answer:

First, Subtract COGS and Operating Expenses from Revenue to get to Operating Income (EBIT)

Then, Multiply EBIT * (1 - Tax Rate), add back D&A and all non-cash expenses, and adjust for changes in net working capital.

Finally, subtract Capital Expenditures to give you Unlevered Free Cash Flow

Question:

Walk me through how to get from Revenue to Unlevered Free Cash Flow in your DCF projections

Answer:

Other

DCF

How do you determine the discount rate in a DCF?

How do you select the appropriate exit multiple when calculating terminal value?

How do you calculate terminal value?

What is a potential issue with basing terminal multiples on current public company multiples?

Why do you usually project out 5-10 years in a DCF?

What is the mid-year convention and why would you use it in a DCF?

What happens to WACC as you increase leverage?

Would you expect the WACC to be higher for a $1 billion or $100 million market cap company?

How do you calculate WACC?

Would you expect the cost of equity to be higher for a $1 billion or $100 million market cap company?

How do you calculate cost of equity?

What happens if you use Levered Free Cash Flow instead of Unlevered Free Cash Flow in your DCF?

How do you calculate beta?

What is beta?

What are the formulas for un-levering and levering Beta?

How do you calculate WACC for a private company?

Which company would we expect to have a higher beta, an industrials company or an internet company?

Walk me through a DCF

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