How to Build a Discounted Cash Flow (DCF) | Step-By-Step Guide From Ex-JP Morgan Investment Banker

In this video, I provide a step by step guide on how to build a Discounted Cash Flow (DCF) model.

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⏱Timestamps⏱
0:00 - Introduction
1:28 - Alto IRA
3:01 - What is a DCF?
4:12 - The 5 Steps of a DCF
4:36 - Step 1 - Projecting Free Cash Flow
12:51 - Step 2 - Calculating WACC
19:34 - Step 3 - Calculating Terminal Value
23:13 - Step 4 - Discounting back to Present Value
24:16 - Step 5 - Calculating Implied Share Price
27:00 - Advanced Topics

🔎Disclaimer🔎
All content in this video is for entertainment purposes only. I am not a professional financial advisor and my statements are not to be taken as instructions or directions. In addition, some of the links above are affiliate links, meaning that at no additional cost to you, I may earn a commission if you click through and make a purchase.

#dcf #valuation #stocks

[rareliquid]

⭐ Alto IRA⭐

👇Download the Templates👇

🚀Sign up for my Courses🚀

[rareliquid]

⏱Timestamps⏱
0:00 - Introduction
1:28 - Alto IRA
3:01 - What is a DCF?
4:12 - The 5 Steps of a DCF
4:36 - Step 1 - Projecting Free Cash Flow
12:51 - Step 2 - Calculating WACC
19:34 - Step 3 - Calculating Terminal Value
23:13 - Step 4 - Discounting back to Present Value
24:16 - Step 5 - Calculating Implied Share Price
27:00 - Advanced Topics

[lorenzo]

hey Ben, nice video! Would like to see LBOs and Power Point presentation you did at JPM. Ould you do a video about that?

[marcusdenter]

Youre videos are great man! Its easy to get bogged down in over-explaining and going into excruciating detail in these things but you really nailed it in keeping it straightforward and crystal clear so even those new to the topics to grasp. Thats a true mark of an expert mate. Keep doing what you do!

[roydavis]

Your insights on operating assets and operating liabilities. Your insights into years used to project and even mentioning using 20-30 years at JPMorgan. Also really breaking down the information you value worth projecting or using. All very useful, thank you. This was without a doubt your best DCF video yet. It was explained very well.

I was interested in the concept of years used forward, cause really all we're doing is trying to predict a future market cap in todays value. I also realized the market can move rather quickly, so a long projection isn't always going to be the case, it's just simply a way for the calculation to give us a fair idea if we weight it with those years. However with the recession coming those years will likely matter (lol).

[julian]

I just want to say thanks for this video. Couldn’t find much on a step by step tutorial DCF. 🙏🏽🚀

[keedtalktoem]

Great work, clean and precise on everything. Only thing i would argue on is the TGR being equal to GDP growth. Through my experience i’ve always learned to be conservative when valuing a company and therefore have a TGR usually 1-2% lower than GDP growth

[ecccc]

Clean workbook formatting, easy to follow PPT's, and step-by-step instructions. FANTASTIC instruction methodology, thanks for the informative content!

[MCrypto]

Love the vid, I just think there is a little mistake when calculating the cost of equity at 16:30. It is a + like u mention later instead of x

[AlvinHancock-bp]

I just wanted to say how much I appreciate your commitment to helping traders succeed. Your strategies are so well researched and effective, and your willingness to share them with us without any expectation of payment is truly inspiring. Thank you for being such an amazing teacher and mentor.

[danielmaher]

Great video and explanation. FYI you can make your Ticker a 'Stock' Data Type in excel which gives you access to some useful info like market cap, beta, share price etc so you don't need to keep updating manually. Worth giving it a try :)

[Jacobson]

Hey Ben, great video! I noticed a minor correction that might be helpful.

The formula for the cost of equity should not multiply the Risk-Free Rate by Beta.

Instead, the correct formula using the Capital Asset Pricing Model (CAPM) is:

Cost of Equity= Risk Free Rate+β×(Expected Market Return−Risk-Free Rate)

All The Best,
Juv

[luisfilipesf]

Hi! Thanks for the video really appreciated. Quick question: how did you make the %growth in revenue and other assumptions?

[JoshuaLam]

hi i have some questions, how do you determine the income statement and casflow items from year 2022-2026? And how do you calculate (or get the data) for 'cost of debt', 'risk free rate', and 'market risk premium'? Thanks. Great content.

[aryavbothra]

This is so awesome!! Could you share the template for the DCF with the multiple cases (conservative, base, etc.) as well please? I’ve been struggling with the formatting for so long and it would be a tremendous help. Thanks so much for this whole DCF series, it’s been a lifesaver!!!

[joshuaalfred]

5 minutes in. Subscribed. I could immediately tell content is legit.

Looking forward to your in-depth video explaining DCF. Everyone else covers a dumbed down DCF, but I want to understand it like the professionals do.

[nev]

Liquid, could you do a desk setup video sometime? Introducing your gadgets etc

[francoestrada]

Don't know if you still read these comments but I absolutely love Random Access Memories and noticed you had it on your wall lol. That aside, amazing video

[mattiovino]

Love these follow along videos. Find them very helpful for learning the basics

[yannbeko]

Those video are so cool ! Complicated to traduce everything from english to french but it makes me step up. Every step count when you have an objectives