DCF and WACC

Core

Forecast free cash flow, terminal value, discount rates, sensitivities, and the DDM for banks.

Forecast revenue down to EBIT, tax it to NOPAT, then add back D&A and subtract capex and the increase in net working capital to get unlevered free cash flow. Discount each year's UFCF and a terminal value (Gordon growth or exit multiple) at WACC and sum them to enterprise value. Bridge to equity value by subtracting net debt, preferred stock and non-controlling interest and adding non-operating assets, then divide by diluted shares for an implied share price.

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