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    DCF Simple Exercises

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    Huy Tuan Ly
    The document analyzes the valuation of a hot dog stand using a discounted cash flow (DCF) model and comparable company (comps) analysis. The DCF yields a value of $323,547 using a 10% discount rate and 5% perpetual growth rate. The comps analysis uses comparable hot dog stand transactions to derive an implied value of $273,500 based on a peer multiple of 26x. Additional information is provided on Home Depot's weighted average cost of capital (WACC) of 6.5%.

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    DCF Simple Exercises

    Uploaded by

    Huy Tuan Ly
    55 views4 pages
    The document analyzes the valuation of a hot dog stand using a discounted cash flow (DCF) model and comparable company (comps) analysis. The DCF yields a value of $323,547 using a 10% discount rate and 5% perpetual growth rate. The comps analysis uses comparable hot dog stand transactions to derive an implied value of $273,500 based on a peer multiple of 26x. Additional information is provided on Home Depot's weighted average cost of capital (WACC) of 6.5%.

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    The document analyzes the valuation of a hot dog stand using a discounted cash flow (DCF) model and comparable company (comps) analysis. The DCF yields a value of $323,547 using a 10% discount rate and 5% perpetual growth rate. The comps analysis uses comparable hot dog stand transactions to derive an implied value of $273,500 based on a peer multiple of 26x. Additional information is provided on Home Depot's weighted average cost of capital (WACC) of 6.5%.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as xlsx, pdf, or txt
    55 views4 pages

    DCF Simple Exercises

    Uploaded by

    Huy Tuan Ly
    The document analyzes the valuation of a hot dog stand using a discounted cash flow (DCF) model and comparable company (comps) analysis. The DCF yields a value of $323,547 using a 10% discount rate and 5% perpetual growth rate. The comps analysis uses comparable hot dog stand transactions to derive an implied value of $273,500 based on a peer multiple of 26x. Additional information is provided on Home Depot's weighted average cost of capital (WACC) of 6.5%.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
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    Download as xlsx, pdf, or txt
    of 4

    Hot dog stand: DCF analysis

    Discount rate 10%


    Perpetual growth rate 5%
    Year 2012 2013 2014 2015
    Period 1 2 3 4
    Cash flow $10,500 $13,000 $15,000 $17,500
    Present value (PV) of cash flow
    2017 cash flow
    Perpetuity value in 2016
    PV of perpetuity value
    DCF value (PV of all cash flows)
    Hot dog stand: Comps
    Cash flow Sales price Multiple
    Comp 1 10,000.0 260,000.0
    Comp 2 14,000.0 380,000.0
    Comp 3 6,000.0 150,000.0
    Peer group mean
    Our hot dog stand 10,500.0
    Comps-derived multiple
    Implied value
    Home Depot WACC
    Shares outstanding 1,500.0
    Share price $50.00
    Debt 7,600.0
    Cost of debt 6.0%
    Marginal tax rate 35.0%
    Beta 0.8
    Market risk premium 6.0%
    Risk free rate 2.0%
    Debt weight
    Equity weight
    WACC
    Comments
    2016
    5
    $20,500
    Cash flow/(1+discount rate)
    period
    2016 cash flow * (1+perpetual growth rate)
    2017 cash flow / (discount rate - perpetual growth rate)
    Perpetuity value / (1+discount rate)
    5
    PV of perpetuity value + sum of 2012-2016 PV of cash flows
    Hot dog stand: DCF analysis
    Discount rate 10%
    Perpetual growth rate 5%
    Year 2012 2013 2014 2015
    Period 1 2 3 4
    Cash flow $10,500 $13,000 $15,000 $17,500
    Present value (PV) of cash flow 9,545.5 10,743.8 11,269.7 11,952.7
    2017 cash flow 21,525.0
    Perpetuity value in 2016 430,500.0
    PV of perpetuity value 267,306.6
    DCF value (PV of all cash flows) 323,547.2
    Hot dog stand: Comps
    Cash flow Sales price Multiple
    Comp 1 10,000.0 260,000.0 26.0x
    Comp 2 14,000.0 380,000.0 27.1x
    Comp 3 6,000.0 150,000.0 25.0x
    Peer group mean 26.0x
    Our hot dog stand 10,500.0
    Comps-derived multiple 26.0x
    Implied value 273,500.0
    Home Depot WACC
    Shares outstanding 1,500.0
    Share price $50.00
    Debt 7,600.0
    Cost of debt 6.0%
    Marginal tax rate 35.0%
    Beta 0.8
    Market risk premium 6.0%
    Risk free rate 2.0%
    Debt weight 9.2%
    Equity weight 90.8%
    WACC 6.5%
    Comments
    2016
    5
    $20,500
    12,728.9 Cash flow/(1+discount rate)
    period
    2016 cash flow * (1+perpetual growth rate)
    2017 cash flow / (discount rate - perpetual growth rate)
    Perpetuity value / (1+discount rate)
    5
    PV of perpetuity value + sum of 2012-2016 PV of cash flows

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