FORMULA CARD
Use a compact DCF responsibly
Valuation is a range built from assumptions, not a guaranteed price target
Core formulas
| Measure | Formula | What it tells you | Common error |
|---|---|---|---|
| Present value of FCF | FCF / (1 + WACC)^t | Today’s value of forecast cash flow | Using inconsistent timing |
| Terminal value | Final FCF × (1 + g) / (WACC - g) | Value beyond the explicit forecast | Setting terminal growth at or above WACC |
| Enterprise value | PV of forecast FCF + PV of terminal value | Value of operations before net debt | Mixing enterprise and equity values |
| Equity value | Enterprise value - Net debt | Value attributable to equity holders | Subtracting cash twice |
| Value per share | Equity value / Diluted shares | Indicative value per diluted share | Using basic rather than diluted shares without reason |
Required checks
- WACC must exceed terminal growth.
- Forecast FCF must be explainable.
- Net debt and diluted shares need Source IDs.
- Treat the output as a sensitivity range.