DCF Enterprise and Equity Valuation
Build an auditable DCF with operating forecasts, WACC, terminal value, an equity bridge, and valuation sensitivities.
Before & after
Same prompt, same agent — the only difference is the skill.
That's a complex question that depends on many factors. You'd want to look at your revenue projections, growth rate, discount rate assumptions, terminal value, and how comparable companies are trading. Building a DCF model would involve forecasting your free cash flows, estimating your cost of capital, and then discounting everything back. The valuation you get will depend heavily on your assumptions, so it's worth stress-testing different scenarios. What's your current revenue and growth rate? That would help me give you a rough range.
DCF VALUATION MODEL — SAMPLE COMPANY
Educational modeling only. Not investment advice.
COMPANY SNAPSHOT
Current revenue: 5M / year
Growth rate: 45% YoY (assumed declining to 15% by year 5)
Operating margin: 20% (target)
Tax rate: 21%
WACC: 8.5% (your cost of capital)
FREE CASH FLOW PROJECTION (Years 1-5)
Year 1: Revenue 7.25M (45% growth) → FCF 1.13M
Year 2: Revenue 10.5M (45% growth) → FCF 1.82M
Year 3: Revenue 13.7M (30% growth) → FCF 2.27M
Year 4: Revenue 15.8M (15% growth) → FCF 2.41M
Year 5: Revenue 18.2M (15% growth) → FCF 2.73M
TERMINAL VALUE (assumes 2.5% perpetual growth after year 5)
Year 5 FCF: 2.73M × (1 + 2.5%) / (WACC - growth rate)
= 2.73M × 1.025 / (8.5% - 2.5%)
= 46.8M
PRESENT VALUE CALCULATION (discount to today at 8.5%)
Year 1 FCF: 1.13M / 1.085 = 1.04M
Year 2 FCF: 1.82M / 1.085^2 = 1.55M
Year 3 FCF: 2.27M / 1.085^3 = 1.76M
Year 4 FCF: 2.41M / 1.085^4 = 1.72M
Year 5 FCF: 2.73M / 1.085^5 = 1.83M
Terminal PV: 46.8M / 1.085^5 = 31.2M
TOTAL ENTERPRISE VALUE: 39.2M
Less: Net debt (assume 2M cash, 0 debt): -2M
= EQUITY VALUE: 41.2M
VALUATION RANGE (Sensitivity Analysis)
WACC / Terminal Growth scenarios:
2% growth | 2.5% growth | 3% growth
7.5% WACC: $52M | $58M | $67M
8.5% WACC: $38M | $41M | $45M (base case)
9.5% WACC: $29M | $31M | $34M
→ VALUATION RANGE: $31M - $58M, base case $41M
SENSITIVITY DRIVER: WACC has bigger impact than terminal growth
• 1% change in WACC = ±$5M valuation swing
• 0.5% change in terminal growth = ±$3M valuation swing
← Spend time validating cost of capital first.
CRITICAL ASSUMPTIONS TO VALIDATE
1. Growth rate (45% → 15%): Is this realistic? Compare to industry comps.
2. Operating margin (20%): Can you hit this? What's your current margin?
3. WACC (8.5%): Risk-adjusted discount rate. Startups typically 12-15%, public SaaS 8-10%.
4. Terminal growth (2.5%): Conservative long-term assumption. Check against GDP growth + inflation.
INTERPRETATION
• $41M base case = reasonable valuation IF your assumptions hold
• If board is offering $30M, you're 27% down from base (modest discount)
• If board is offering $55M, you're 34% up from base (premium, validate assumptions)
• Discount rate of 12-15% (higher risk) drops valuation to $25-32M
← Run this model with YOUR numbers. Adjust growth, margin, and WACC until valuation "feels right" against market comps and your personal confidence in execution.About this skill
Your DCF produces a precise share price, but the answer changes dramatically when you touch terminal growth or the discount rate. This skill builds the valuation from operating assumptions, exposes what drives the result, and catches errors that can make a polished model misleading.
What it does
- Builds unlevered free cash flow from revenue, operating margins, taxes, reinvestment, and working capital.
- Calculates WACC while checking capital weights, tax shields, currency, and cash-flow consistency.
- Models terminal value with sustainable reinvestment and a matching discount convention.
- Bridges enterprise value to common equity and per-share value without double-counting debt, cash, or dilution.
- Recalculates WACC/growth sensitivities and separates operating scenarios from discount-rate changes.
- Reviews pasted DCFs for material errors and identifies which corrections change the conclusion.
What you get
An assumption-led DCF with forecast cash flows, discount factors, terminal value, an enterprise-to-equity reconciliation, and a sensitivity table. Each result distinguishes supplied facts, modeling assumptions, and unresolved inputs; quick reviews receive focused corrections rather than a full model.
Best for
Analysts, founders, corporate development teams, and finance students building or checking a company valuation.
SKILL.md preview
---
name: dcf-enterprise-and-equity-valuation
description: >-
Build or audit a discounted cash flow valuation by linking operating drivers to unlevered cash flow, computing consistent WACC and terminal value, reconciling enterprise to equity value, and recalculating sensitivities. Use when the user says "build a DCF", "value this company from cash flows", "check my valuation model", "my DCF keeps giving absurd values", "is my terminal growth too high?", "turn enterprise value into a share price", or "make a WACC sensitivity table".
---
# DCF Enterprise and Equity Valuation
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