DCF Model Example

The forecast starts with five revenue segments, each carrying its own growth rate and gross margin. Stage-one growth applies through an explicit early period, then fades linearly toward a terminal growth rate across the remaining projected years.

• This structure avoids a sudden growth kink and lets a mixed software and services portfolio behave differently by segment. Operating costs split into fixed-base lines that compound from a first-year amount and variable lines tied to revenue, with marketing treated as scenario-sensitive.
• CapEx and depreciation are entered as revenue percentages, while working capital is derived from days sales outstanding, days inventory outstanding and days payables outstanding. A tax section rolls forward net operating losses, which matters for targets carrying tax shields into early forecast years.

Together these drivers mean the model does not simply grow a single revenue line. It separates volume-like growth, margin mix, reinvestment and tax timing, so a change in segment mix or collection assumptions shows up in cash flow rather than hiding inside a blended average.

Unlevered free cash flow is built from EBIT less cash taxes, plus depreciation and amortisation, less capital expenditure and less the change in net working capital. The discount rate comes from a WACC build using CAPM, with peer betas unlevered and re-levered through the Hamada relationship, an after-tax cost of debt, and target capital weights.

• Discounting can follow either a mid-year or end-of-year convention, and the model supports a stub period for first-year timing. Terminal value is calculated two ways: a Gordon growth perpetuity using normalised free cash flow, and an exit multiple applied to final-year EBITDA.
• Both use the same discount factor as the final explicit period to avoid a half-period mismatch. The model then takes the average enterprise value, but also displays the implied exit multiple and implied perpetuity growth so the two methods can be compared.

The design pays particular attention to steady-state consistency. Normalised free cash flow uses terminal capital expenditure and a terminal working capital change, with terminal CapEx defaulting to terminal depreciation so a perpetuity is not overstated by an investment profile that never converges.

After the average enterprise value is determined, the model bridges to equity by subtracting gross debt, preferred stock and minority interest, and adding cash and associates. Each of those items is labelled as of the valuation date, so the measurement date is explicit rather than assumed.

• The resulting equity value supports an implied share price and underpins the sensitivity grids that vary WACC against terminal growth and against the exit multiple. A separate comparables cross-check places peer multiples alongside the discounted cash flow result, and a checks sheet runs ten institutional sanity tests.
• Those tests cover terminal value as a share of enterprise value, whether the implied perpetuity growth or exit multiple falls outside a plausible band, the requirement that WACC exceeds terminal growth, also that discount factors decline monotonically, and that segment revenue ties to total revenue.

A scenario toggle switches thirteen critical inputs between base, bull and bear sets, including segment growth, capital expenditure, marketing, terminal growth and exit multiple. The point is to test how sensitive the valuation is to a coherent set of assumptions rather than to move every input independently.

The model is documented for mature operating businesses, standalone acquisition baselines, leveraged buy-out or private-credit screening, and sale-process fairness work where sensitivities are the deliverable. It is intentionally an enterprise DCF: unlevered free cash flow discounted at WACC, then bridged to equity.

• That makes it less suitable where capital structure or regulated returns are the central story, such as financial institutions, insurance, utilities or REITs, for which the design points to an alternative dividend discount approach. Pre-revenue companies without a meaningful NOPAT base are outside the documented scope.
• It is also worth noting that the public download is a values-only preview. The underlying model captures these relationships, but the preview should be read as an illustration of structure and calculation flow rather than a live, automatically recalculating workbook.

Default calibration is to a mid-cap mixed-portfolio operating business, and the model's own checks are designed to pass under base, bull and bear scenarios. Readers evaluating the template should focus on whether the driver set, terminal value treatment and bridge match the business being valued.