Duncan McKeen – CFI Education – DCF Valuation Modeling

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Duncan McKeen – CFI Education – DCF Valuation Modeling
DCF Valuation Modeling

A discounted cash flow (DCF) approach is one of the most common valuation techniques. If done properly, it provides a very meaningful measure of the enterprise value or equity value.

Learn how to design, construct, and review a best-in-class DCF valuation model
Avoid common errors made with cash flows, discount rates, taxes, and timing
Use one- and two-dimensional data tables to illustrate sensitivity to key inputs

Overview

DCF Valuation Modeling Course Overview

DCF Valuation is one of the most common valuation techniques used in modern finance today. This technique is flexible in that it can be used for very early-stage growth companies as well as established companies operating in more mature industries. Although DCF Valuation is one of the soundest valuation techniques, errors in DCF models are actually quite common. Finance professionals often make mistakes related to the calculation and pairing of the company’s cash flows and its discount rate. Errors related to the timing of cash flows or the valuation date are also quite common. Finally, many struggle with the right level of detail for income tax calculations and fail to correctly break out the current and deferred taxes in both levered and unlevered income tax schedules.
DCF Valuation Modeling Learning Objectives

Upon completing this course, you will be able to:

Understand how DCF Valuation compares to Comparable Trading Analysis and Precedent
Transaction Analysis and the pros and cons of each valuation technique.
Review the importance of upfront model design and the best layout for a DCF Valuation Model, which has been optimized for presentation and printing.
Discuss common errors made with income taxes and the need for both a levered and unlevered income tax schedule in the model.
Understand the importance of pairing the right cash flows (UFCF) with the correct discount rate (WACC) and review the steps for calculating each of these in detail.
Build separate schedules for both the perpetuity method and the multiple method for calculating the terminal value and discuss common errors related to timing.
Design and build a dashboard for stakeholders using one and two-dimensional data tables to illustrate the model’s sensitivity to critical valuation inputs.

Recommended Prerequisite Courses
These preparatory courses are optional, but we recommend you complete the stated prep course(s) or possess the equivalent knowledge prior to enrolling in this course:

Financial Analysis Fundamentals
Accounting Principles and Standards
Operational Modeling

Who Should Take This Course?

This course is most suitable for anyone working in valuation, including investment banking, equity research, private equity, and corporate development.
What you’ll learn
DCF Model Theory

Course Introduction

Downloadable Files

Important Dates

Time Quantity of Money

Cash Flows & Discount Rates

How Long to Forecast For

Discrete Forecast

Terminal Value

Enterprise Value & Equity Value
Compact DCF Model

Download Compact Model Template

Keyboard Shortcuts

Model Structure

Formula Building

UFCF Schedule

DCF Schedule Part 1

DCF Schedule Part 2

Sensitivity Analysis Part 1

Sensitivity Analysis Part 2

Sensitivity Analysis Part 3

Download Complete Compact Model

Interactive Exercise 1

Check-in
Valuation Techniques

Comparison of Techniques

Various Views of Value

Interactive Exercise 2
DCF Model Design

Financial Modeling Guidelines

Preferred Design Process Part 1

Preferred Design Process Part 2

Preferred Model Layout

Building Blocks

Interactive Exercises 3
Model Drivers

Understanding Drivers

Download Full Model Template

Tour of DCF Model

Choose & Index Functions

Combo Box

Solution

Interactive Exercises 4

Check-in
[Optional] Macabacus

Overview of Tables

Uploading Schedules

Tips for Uploads
Operational Schedule

Overview Operational Schedule

Revenue & Costs Overview

Revenue & Costs Solution

Overview of Other Schedules

Solution of Other Schedules

Solution of Levered Tax Schedule

Solution of Income Statement

Reasons for Deferred Taxes

Interactive Exercises 5

Check-in
Tax Schedules

Two Tax Schedules

Tax Shield from Interest
UFCF Schedule

UFCF Schedule Overview

Unlevered Tax Schedule

Tax Shield from Interest

Ensuring Consistency

Two UFCF Methods

Schedule Overview

Schedule Solution

Interactive Exercises 6

Check-in
WACC Schedule

Time Quantity of Money

WACC Formula

Cost of Debt Formula

Cost of Equity Formula

Beta Formula

Overview of Schedule

Schedule Build Part 1

Schedule Build Part 2

Interactive Exercises 7
Other Inputs

Model Alert Part 1

Model Alert Part 2

Model Alert Part 3

Check-in
DCF Schedule

Two Components

Key Timing Events

Three Important Dates

Finance Equations

Perpetuity Overview

Perpetuity Build Dates

Perpetuity Build Adjustments

Perpetuity Build Discounting

Perpetuity Build Enterprise Value

Perpetuity Build Equity Value

Multiple Overview

Multiple Build Terminal Value

Multiple Build Enterprise Value

Interactive Exercises 8

Check-in
Dashboard

Presenting Outputs

Perpetuity Overview

Perpetuity 2D Data Table

Perpetuity Equity Value

Perpetuity Master Switch

Perpetuity 1D Data Table

Multiple Method
Model Review

Locating Inputs

Go To Precedent and Return

Check for Row Differences

Download Complete Full Model

Interactive Exercises 9

Course Summary
Qualified Assessment

Qualified Assessment
What our students say
Great Course with amazing instructor Mr. Duncan McKeen! Thank

Nader Elsayed Elsayed Eldeeb 
Brilliant

DCF modelling looks very complex to me until I did From CFI . There’s a combination of less complexity and vey good formatting.

Kartik Goyal