How to create a Discounted Cash Flow Valuation Model

There are countless ways to conduct a valuation of an asset or a business. One of the commonly used valuation methods nowadays is the Discounted Cash Flow Valuation Method or simply known as the DCF Model. A discounted cash flow valuation model is based on the expected cash flow of a business. Basically, it focuses more on cash in and out rather than profits. However, there is a need to set different assumptions which are more likely subjective and prone to manipulation. Hence, a very solid analysis and a rational argumentation are needed to be done in order for the resulting value to be realistic and honest.

To create a reliable and solid discounted cash flow valuation model, one would need a substantial knowledge about financial modeling and industry know-how. But, you don’t have to fret over that since acquiring an Excel valuation template will resolve that for you. As long as you have the Excel valuation template, you don’t have to spend a lot of time figuring out the structure and the components needed to complete a discounted cash flow valuation model. All you have to do is input the values, ratios, estimates, assumptions, etc., to complete the model.

If you have any specific changes done to the model, you can also customize it according to your needs. It won’t be that troublesome at all since the template is in Excel so it’s pretty flexible and there’s transparency regarding the formulas used for all the calculations done in the model. Thus, making the task of updating the model easier and user-friendly. But, if you came upon an issue, don’t hesitate to consult a financial modeling expert to guide you, and at the same time, learn more about valuation modeling so that next time, you won’t need any help with completing a DCF Model.

If you are interested on how to create a discounted cash flow valuation model and how it works, you can read the full article here: Discounted Cash Flow Valuation. Included in the article are more details regarding the DCF Model and also, a free Excel Valuation Template which you can download to see what a DCF Model looks like and get an idea on how to create a full DCF Model on your own. You can also choose from this list of DCF Model Templates specially tailored for different business industries, which you can use to start a DCF model according to your preferences.