
Free Company Share Price Valuation (Free Cash Flow to Firm) Spreadsheet
Company Share Price Valuation using Free Cash Flow to Firm
This spreadsheet values a company's share price by using the Free Cash Flow to Firm of a 10 years projection horizon. The Free Cash Flow to Firm is defined as the sum of the cash flows to all claim holders in the firm, including equity holders and lenders.
Valuation Summary
The Free Cash Flow to Firm (FCFF) is calculated as follows:
FCFF = EBIT * (1Tax rate) + Depreciation  Capital expenditure  Change in Working Capital
The terminal value of the firm beyond the projection horizon is also estimated and added to the cash flow. The final cash flow discounted with the cost of capital provides a value of the operating assets. By adding the value of the non operating assets and deducting the value of debt, the equity value is derived.
Assumptions
The following are inputs to be entered into the spreadsheet as assumptions. The values will be used by other parts of the spreadsheet.
 Discount Rate  Weighted Average Cost of Capital. This is used to discount the cash flow to firm.
 Tax Rate  Company's Tax Rate
 Growth rate of Cash Flow after projection horizon  A fix growth rate after the projection horizon. This growth rate is used in the estimation of the Terminal Value of the company.
 Value of Non Operating Assets  The Discounted value of the Free Cash Flow to Firm yields the value of the operating assets. The equity value can be derived by adding the value of the Non Operating Assets and deducting the value of debt from the value of the operating assets.
 Value of Debt  The Discounted value of the Free Cash Flow to Firm yields the value of the operating assets. The equity value can be derived by adding the value of the Non Operating Assets and deducting the value of debt from the value of the operating assets.
 Number of Common Shares  The equity value will be divided by the number of common shares to determine the price per share.
Projected Income
The Earnings before Interest & Taxes (EBIT) is calculated as follows:
Earnings before Interest & Taxes(EBIT) = Net Sales  Total Variable Costs  Total Fixed Costs  Depreciation
Net income is calculated as follows:
Net income  EBIT  Taxes
Net Working Capital and Investment (Capital Spending)
The Net Working Capital and Investment (Capital Spending) are taken into account in these two sections.
The Net Working Capital at Year 0 can be entered directly into the spreadsheet. From Year 1 onwards, it is calculated as as function over Net Sales as follows:
Net Working Capital = Net Working Capital over Sales * Net Sales
Net Working Capital cash flow is calculated as follows:
Net Working Capital cash flow = (Current Year Net Working Capital  Previous Year Net Working Capital) + NWC Recovery at end
Aftertax salvage value is calculated as follows:
Aftertax salvage value = Salvage value * (1  Tax Rate)
Net Capital Spending is calculated as follows:
Net Capital Spending = Initial Investment + Aftertax salvage value
Projected Free Cash Flows
This section uses the value from the Net Working Capital, Investment (Capital Spending), EBIT and Depreciation to calculate the Free Cash Flow to Firm.
Free Cash Flow to Firm (FCFF)
FCFF = EBIT * (1Tax rate) + Depreciation  Capital expenditure  Change in Working Capital
Equity Valuation
Terminal Value
The Terminal Value of the Firm is estimated to be as follows:
Terminal Value = Final Year Cash Flow * (1+Growth rate of Cash Flow after projection horizon) / (WACC Discount Rate  Growth rate of Cash Flow after projection horizon)
Operating Value
Operating Value is calculated as follows:
Value of Operating Assets = Net Present Value of Cash Flows + Discounted Terminal Value
Equity Value
Equity Value is calculated as follows:
Equity Value = Value of Operating Assets + Value of Non Operating Assets  Value of Debt
Download Free Company Share Price Valuation spreadsheet  v1.0
System Requirements
Microsoft® Windows XP®, Microsoft® Windows Vista®, Windows 7 or Windows 8
Windows Server 2003, 2008, 2012
512 MB RAM
5 MB of Hard Disk space
Excel 2002, 2003, XP, 2007, 2010, 2013
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FreeCompanySharePriceValuation.zip (Zip Format  97 KB)
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