DCF Model (Discounted Cash Flow Valuation Model)

Discounted Cash Flow DCF Valuation

The DCF Model template allows you to quickly perform a Discounted Cash Flow Valuation from the convenience of your own Excel file.

The Discounted Cash Flow Valuation Model

A DCF valuation is a forward looking valution method based on an expected cash flow stream going forward. The DCF valuation method focuses on cash and not on accounting profits, therefore includes any effects which impact the cash position of a company before considering the type of financing (debt or equity). As such a DCF valuation is one of the theoretically most solid valuation methods which can be used to value a company or an asset. Other valuation methods often used by practicioners, such as e.g. comparable market multiples or replacement cost considerations at the end of the day fall short to correctly consider the company’s specific future prospects. This advantage makes the DCF valuation method very powerful and – when done correctly – will lead to the identification of many good arguments to be considered. Most DCF valuations use the unlevered cash flow available to the company, the Free Cash Flow to Firm.

However, the main challenge with the DCF valuation is that it requires a set of forward looking assumptions, which normally are quite subjective and more often are subject to manipulation. Therefore a very solid analysis and objectively rational argumentation needs to be made in order to make the result of a DCF valuation believable.

We have put together a simple DCF model free of charge to give you a tool set value a company via this valuation method.

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How the DCF Model Works

The DCF model comes as Excel template and requires a Free Cash Flow stream of minimum 5 years. This is normally done by forecasting the financial statements of a company over the next years. We have therefore included a three statement model in this Excel file, which allows you to build the Income Statement, Balance Sheet and Cash Flow Statement of the company. Afterwards, its possible to calculate the Free Cash Flow to Firm over the next years by adding up the following:

  • EBIT (Earnings before Interest and Taxes)
  • Adjusted Taxes (the applicable income tax rate applied to EBIT
  • Addback Depreciation and Amortization as these are non-cash expenses
  • Change in Net Working Capital needs to count for any changes of the working capital required to run a company
  • CAPEX which is one of the major cash flows and needs to be deducted

The DCF model will then require a discount rate to discount the future cash flows back to its present value. The discount rate should reflect the company’s risk (or the risk of an asset).

  • Weighted average cost of capital (debt and equity costs weighted). See the WACC model how to calculate the WACC.

The discounted cash flow valuation model will then discount the Free Cash Flows to Firm to their present value which will be equal to the Enterprise Value. In order to obtain the Equity value, net debt will be deducted.

  • Deduct a company’s financial debt
  • Add company’s cash

The equity value will be the end result of your  discounted cash flow valuation model .

You can use this DCF model as a starting point to build your own DCF valuation model. You can simply start to replace the line items with more detailed calculations which reflect the value of your company. The discounted cash flow valuation model will work as long as the figures are correctly flowing into the Free Cash Flow to Firm.


DCF model in Excel
DCF model in Excel

The DCF model provides a template for to value a company via the Discounted Cash Flow (DCF) valuation method.

Filetype: .xlsx

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DCF Three Statement Model
DCF Three Statement Model


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Summary This simple DCF model in Excel allows you to value a company via the Discounted Free Cash Flow (DCF) valuation method. The discounted cash flow valuation model uses a three statement model to derive free cash flows to firm and discounts them to their present value.
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