Zoho Sheet

FCFF VALUATION MODEL

Before you start

The spreadsheet has circular reasoning. This is not a problem. Go into calculation options (in excel) and check

the iteration box.

What the model does

This model is designed to value firms with operating income that is either positive or can be normalized to be

positive. It allows for up to 15 years of high growth, and can be used either as a 2-stage or a 3-stage model.

Inputs

The inputs are in the following pages:

1. The bulk of the inputs are in the master inputs page. Here, you can input the numbers from the current

financial statements, and review and change the inputs for the valuation.

2. If you want to normalized operating income, use the earnings normalizer worksheet.

3. If you have R&D or operating leases, you will need to input the required numbers in those worksheets.

Important: Be consistent about the units you use. If you use millions, use millions for all of your inputs.

Options

The spreadsheet can be used to value a company, with fixed inputs for a high growth phase and different inputs

for a stable growth phase (2-stage model) or it can be adjusted to allow for a transition phase (3-stage model).

To switch from one to the other, enter yes in the master input page to the question of whether you want the

inputs adjusted during the second half of the high growth phase.

You can even make it a stable growth model, by setting the length of the high growth period to zero.

Other worksheets

There are two other worksheets that you might find useful at the end of this spreadsheet

1. Bottom-up beta estimator: will estimate your levered beta, given an unlevered beta (which you will have to

input.

2. Industry averages: Here, you can look up industry averages for variables such as beta, return on capital,

reinvestment rates and working capital.

Output

The output is contained in the valuation model worksheet.

Read me first

Master Inputs Start here

Earnings Normalizer

R_D converter

Operating lease converter

Valuation Model

LifeHighGrowthWhat_if

Option Value

Bottom_up Beta

Ratings estimator

Industry averages