A DCF that shows its working, and a sensitivity table that earns its place.
The discount rate is built up from its parts rather than typed in. The terminal value can be taken two ways, and each one is quoted back as the other, a growth assumption stated as the exit multiple it amounts to, and vice versa. Every cell in the sensitivity grid is a full revaluation, and clicking one adopts it.
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The cash flows come from the three-statement model in this same portfolio, not a second set of invented numbers. Change the operating scenario below and the valuation moves, because the forecast does.
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Unlevered free cash flow
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Interest is deliberately absent. The cost of debt already sits inside the discount rate, so deducting it here as well would charge for the same financing twice, which is why this builds to an enterprise value, from which net debt is bridged out.
The cash flows aren't typed in
They come from the three-statement model: EBIT, depreciation, capex and the working-capital movement, all from a forecast whose balance sheet balances. The commonest fault in a spreadsheet DCF is a valuation tab whose EBITDA stopped agreeing with the model two tabs to the left.
The discount rate is built, not chosen
Risk-free, equity risk premium, beta, country premium, cost of debt, tax shield and target weights, each one visible and each one movable. A WACC that arrives as a single number is a WACC nobody can argue with, which is not a virtue.
Each terminal value checks the other
A Gordon growth assumption is quoted back as the exit multiple it amounts to; an exit multiple is quoted back as the perpetuity growth it assumes. Most disagreements about a DCF are really disagreements about the terminal value, and this puts the argument where it belongs.
Impossible cells say so
Gordon growth needs the discount rate above the growth rate. Where the grid crosses that line the cell reads n/a instead of a number, because a negative denominator produces a confident, enormous and completely wrong valuation.
Conventions on the surface
Mid-year discounting is a toggle, not a hidden choice, and when it's on the terminal value still discounts at the full final year , it's a lump sum at the end of the forecast, not a flow through it. The share of value sitting in the terminal value is shown, and flagged when it passes 80%.
Tested against first principles
Fifty checks on the engine alone: discount factors derived independently, both terminal value methods round-tripped through their own implied assumptions, every sensitivity cell verified as a genuine revaluation, and the grid checked so that a cell is refused if and only if growth meets or beats the discount rate.
Need a valuation that survives a second reader?
DCFs, comparable-company analysis and operating models in Excel, assumptions in one place, conventions stated, and the sensitivity tables built before anyone asks for them.