Skip to content
Scrim
Learn/DCF Valuation/Formula sheet

DCF Valuation Formula Sheet

Every formula in the track on one page. Print it and keep it next to you.

Free Cash Flow

Unlevered Free Cash Flow
UFCF=EBIT (1−t)+D&A−CapEx−ΔNWC\text{UFCF} = \text{EBIT}\,(1 - t) + \text{D\&A} - \text{CapEx} - \Delta\text{NWC}

Tax-affect EBIT at the marginal rate; add back non-cash D&A; subtract real cash uses. Discount at WACC.

Levered Free Cash Flow
LFCF=CFO−CapEx−Debt Repayment\text{LFCF} = \text{CFO} - \text{CapEx} - \text{Debt Repayment}

Cash to equity, after debt service. Discount at the cost of equity.

Net Working Capital
NWC=Non-cash CA−Non-debt CL\text{NWC} = \text{Non-cash CA} - \text{Non-debt CL}

An increase consumes cash (subtract ΔNWC); a decrease frees cash.

EBITDA
EBITDA=EBIT+D&A\text{EBITDA} = \text{EBIT} + \text{D\&A}

Discounting

Present value of a cash flow
PV=CFt(1+r)t\text{PV} = \dfrac{CF_t}{(1 + r)^{t}}
Net present value
NPV=CF0+CF11+r+CF2(1+r)2+⋯\text{NPV} = CF_0 + \dfrac{CF_1}{1+r} + \dfrac{CF_2}{(1+r)^2} + \cdots

The unlevered DCF's NPV is enterprise value.

Discount factor
DFt=1(1+r)t\text{DF}_t = \dfrac{1}{(1 + r)^{t}}

WACC & Cost of Capital

WACC
WACC=DV Rd (1−Tc)+EV Re\text{WACC} = \dfrac{D}{V}\,R_d\,(1 - T_c) + \dfrac{E}{V}\,R_e
Cost of equity (CAPM)
Re=Rf+β (Rm−Rf)R_e = R_f + \beta\,(R_m - R_f)
Unlever beta
βa=βe 1+(1−Tc) DE \beta_a = \dfrac{\beta_e}{\,1 + (1 - T_c)\,\dfrac{D}{E}\,}

Strip out leverage to compare business risk; re-lever to the target structure.

After-tax cost of debt
Rd after-tax=Rd (1−Tc)R_d^{\,\text{after-tax}} = R_d\,(1 - T_c)

Terminal Value

Perpetuity growth method
TV=FCFt (1+g)WACC−g\text{TV} = \dfrac{\text{FCF}_t\,(1 + g)}{\text{WACC} - g}

Keep g GDP-like (2–4%). TV is at the end of the forecast - discount it back to today.

Exit multiple method
TV=EBITDAt×Exit Multiple\text{TV} = \text{EBITDA}_t \times \text{Exit Multiple}
Implied exit multiple
TVperpetuityEBITDAt\dfrac{\text{TV}_{\text{perpetuity}}}{\text{EBITDA}_t}
Implied growth (from exit multiple)
g=TVexit×WACC−FCFtTVexit+FCFtg = \dfrac{\text{TV}_{\text{exit}}\times \text{WACC} - \text{FCF}_t}{\text{TV}_{\text{exit}} + \text{FCF}_t}

Working-Capital Ratios

Days Sales Outstanding
DSO=A/RSales×365\text{DSO} = \dfrac{\text{A/R}}{\text{Sales}}\times 365
Days Inventory Held
DIH=InventoryCOGS×365\text{DIH} = \dfrac{\text{Inventory}}{\text{COGS}}\times 365
Days Payable Outstanding
DPO=A/PCOGS×365\text{DPO} = \dfrac{\text{A/P}}{\text{COGS}}\times 365

Enterprise Value → Share Price

Enterprise value bridge
EV=Equity Value+Debt+Pref+NCI−Cash\text{EV} = \text{Equity Value} + \text{Debt} + \text{Pref} + \text{NCI} - \text{Cash}
Equity value from EV
Equity Value=EV−Net Debt−Pref−NCI\text{Equity Value} = \text{EV} - \text{Net Debt} - \text{Pref} - \text{NCI}
Implied share price
Price=Equity ValueFDSO\text{Price} = \dfrac{\text{Equity Value}}{\text{FDSO}}
Equity value (market cap)
Equity Value=Price×FDSO\text{Equity Value} = \text{Price} \times \text{FDSO}