best financial modeling course online

Best Financial Modeling Course Online

Best Financial Modeling Course Online

5th Step : Derive Intrinsic Share Price or Fair value

Following are the steps of DCF Value:

  1. Forecast Cash Flows
  2. Calculate Discount Rate
  3. Calculate Terminal Value
  4. Calculate PV of Free Cash Flow and Terminal Value
  5. Derive the Equity Value and Share Price

In this article, we are going to discuss the 5th step of DCF valuation and few related concepts.

Fifth step is to derive the share price which is fair price or intrinsic value or fundamental value of share.

In FCFF model, after discounting FCFF and Terminal value, you get Implied Enterprise Value.

Implied Equity Value = Implied Enterprise Value – Non Equity Claims

Implied Share Price = Implied Equity Value/ Diluted Share Outstanding


In FCFE model after discounting FCFE and Terminal Value, you will directly get Implied Equity Value not Enterprise value.

So when you are directly getting Implied Equity Value, you just need to divide it by Diluted shares outstanding and you will get Implied Share Price.

Implied Share Price = Implied Equity Value/ Diluted Share Outstanding

Learn More…

 

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