Value = Σ FCFₜ ÷ (1 + WACC)ᵗ + Terminal ValueA valuation model exists to estimate long-term cash generation — not to find the statistically cheapest ticker on the screen.
DCF Model Template
A blank discounted cash flow structure you can copy into any spreadsheet or notebook. Every assumption gets its own labeled field, so nothing hides inside a formula. Educational structure only — you supply the numbers and own every assumption.
What this template contains
The template covers the five blocks of a standard DCF: a free-cash-flow base, an explicit forecast period, a discount rate, a terminal value, and a per-share result compared against the current price. Each block includes a notes field so you record why you chose each number, not just what you chose.
Fields in this template
- Company label, ticker, valuation date, and currency.
- Base free cash flow — most recent FCF and how you normalized it.
- Forecast period — years 1–10 growth rate(s) and the reasoning behind them.
- Discount rate — WACC or required return, with its components noted.
- Terminal value — perpetual growth rate or exit multiple, justified in writing.
- Shares outstanding and net debt — to bridge enterprise to equity value.
- Output — intrinsic value per share, current price, implied margin of safety.
- Sensitivity grid — value at ±1% discount rate and ±1% terminal growth.
How to use it
- Copy the structure below into a spreadsheet, one row per field.
- Fill the base FCF from the company's filings — normalize one-off items.
- Write the reasoning note before entering each growth or rate assumption.
- Compute present values year by year, then add the discounted terminal value.
- Fill the sensitivity grid — if small input changes flip the conclusion, the model is telling you the range, not the answer.
Empty example structure
- COMPANY: ______ · TICKER: ______ · DATE: ______ · CCY: ______
- BASE FCF: ______ · NORMALIZATION NOTES: ______
- GROWTH Y1–5: ______% · Y6–10: ______% · REASONING: ______
- DISCOUNT RATE: ______% · COMPONENTS: ______
- TERMINAL GROWTH: ______% · JUSTIFICATION: ______
- SHARES OUT: ______ · NET DEBT: ______
- INTRINSIC VALUE / SHARE: ______ · PRICE: ______ · MOS: ______%
- SENSITIVITY: ±1% RATE → ______ / ______ · ±1% TERMINAL → ______ / ______
The reasoning fields are the point. A DCF without written assumptions is a calculator trick; with them, it is a record of your judgment you can revisit and improve.
- 1What this template contains
- 2Fields in this template
- 3How to use it
- 4Empty example structure
| Shortcut | A blank discounted cash flow structure you can copy into any spreadsheet or notebook. Every assumption gets its own labeled field, so nothing hides inside a formula. Educational structure only — you supply the numbers and own every assumption. |
|---|---|
| Disciplined workflow | What this template contains → Fields in this template → How to use it |
1. What this template contains The template covers the five blocks of a standard DCF: a free-cash-flow base, an explicit forecast period, a discount rate, a terminal value, and a per-share result compared against the current price. Each block includes a notes field so you record why you chose each number, not just what you chose. 2. Fields in this template 3. How to use it 4. Empty example structure
True story · Warren Buffett
A fair price for a wonderful business
In 1988, just months after the Black Monday crash, Warren Buffett quietly began buying Coca-Cola shares. By 1989 Berkshire had spent roughly $1 billion — at about 15 times earnings, hardly a statistical bargain. Wall Street was puzzled: the "cigar-butt" student of Graham was paying up for a household brand.
Buffett was not valuing the next quarter. He was estimating decades of predictable owner earnings from a product sold in nearly every country on earth, protected by the strongest brand moat in consumer goods. Ten years later the stake was worth more than $13 billion, and Berkshire still holds it today — the annual dividends alone now return a large share of the original cost every single year.
A valuation model exists to estimate long-term cash generation — not to find the statistically cheapest ticker on the screen.
≈$1Binvested 1988–89
≈$13Bvalue ten years later
35+ yrsstill held by Berkshire
True story · The Nifty Fifty, 1972
When the price already assumed a miracle
In 1972, institutions convinced themselves that about fifty "one-decision" growth stocks could be bought at any price and never sold. Polaroid traded above 90 times earnings, McDonald's and Disney near 80, Avon around 65. Run the arithmetic backwards and those prices quietly assumed decades of flawless, ever-accelerating growth.
The 1973–74 bear market repriced the dream: the group fell 60–90%, and Polaroid eventually went bankrupt. The cruel detail is that many of the businesses kept growing exactly as promised — the investments still failed, because the starting price had already spent the future.
Run the DCF backwards: ask what growth today's price assumes, then ask honestly whether reality can deliver it.
90×Polaroid's P/E at the top
−60–90%drawdown in 1973–74
10+ yrsto recover, if ever
True story · PetroChina, 2003
A valuation done with an annual report and a weekend
Buffett read PetroChina's annual report at home and pegged the company's value at roughly $100 billion. The market was pricing it near $37 billion. He built no spreadsheet, met no management, sought no second opinion — the gap was too wide to need precision. Berkshire bought about $488 million of the Hong Kong-listed shares.
By 2007, rising oil prices and a re-rating had carried PetroChina's market value past $250 billion. Buffett sold the entire stake for about $4 billion — roughly an eight-fold return plus dividends — and moved on.
When value is triple the price, ordinary accuracy is enough. The best decisions rarely require the most elaborate models.
$37B vs $100Bprice vs estimated value
≈$488Minvested in 2003
≈8×realized by 2007
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Frequently asked questions
How many forecast years should I use?
Five to ten years is conventional. Beyond a decade, forecasts add precision without accuracy — the terminal value handles the long run.
What terminal growth rate is reasonable?
It should not exceed long-run economic growth — typically 2–3%. Anything higher implies the company eventually outgrows the economy itself.
Is the output a price target?
No. It is an estimate conditional on your assumptions, useful as a range and a discipline. This template provides structure, not investment advice.
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