*As I mentioned in the video, here are some further explanations of some of the concepts I brought up:* *Capital Expenditures (CapEx)* - Cash you spend on Plant, Property, and Equipment (PP&E). So Apple spends $100 million on a new office building, that's $100 million of Capital Expenditures. CapEx is NOT found in your income statement because they are usually really large one-time expenses and the income statement tries to capture expenses that occur regularly. Instead, the costs of CapEx are depreciated over time (see below). *Depreciation & Amortization (D&A)* - In the CapEx example, if Apple bought a new building for $100 million and that building had a "useful life" of 20 years, the annual D&A would be $100 million / 20 = $5 million a year. D&A IS found in your income statement either embedded into COGS or Operating Expenses. D&A allows you to fairly deduct CapEx spend over a period of time but it's not actual cash that you're spending (instead the actual cash was a one-time payment in CapEx). *Net Working Capital (NWC)* - For a DCF, this is your current OPERATING assets (i.e. excludes cash, includes assets like inventory, accounts receivable, etc.) minus your current OPERATING liabilities (i.e. excludes debt, includes accounts payable, deferred revenue, etc.). Standard definition for NWC is just current assets minus current liabilities but there's a difference for the DCF. NWC looks at the regular cash inflows and outflows from a company's day to day operations. *WACC Formula* - As a reminder, this is your (% of equity * cost of equity) + (your % of debt * cost of debt * (1 - Tax rate)). % of equity means [equity value / (equity value + debt)]. cost of equity is found through the CAPM formula (risk free rate + beta * market risk premium). % of debt is [debt / (debt + equity value)]. You multiply the debt part times 1 - tax rate because interest payments are tax deductible. 💰Get Free Money💰 ► Coinbase - Get $10 in Free Bitcoin: coinbase.com/join/chon_df?src=ios-link ► Moomoo - Get 2 Free Stocks: j.moomoo.com/005RTE ► Webull - Get 2 Free Stocks: act.webull.com/invite/share.html?inviteCode=5gwmzRWoEVWd ► Schwab - Earn up to $500: www.schwab.com/public/schwab/nn/refer-prospect.html?refrid=REFERBYVYKMZ6 ► Blockfi - Get up to $250: blockfi.mxuy67.net/Keje6z ► Audible - 30 Day Free Trial (Unlimited Audio Books!): amzn.to/3u8aBLq
Hey Ben, thanks for all the explainations. I was wondering whether JPM really uses CAPM model and not a more advanced one as other tier 1 banks. It seems too simple to me :D Keep up the good work!
Hi Ben, I am a year-one LSE student. So many of our students are trying to get into investment banking and it's really nice of you to provide free contents. Thank you so so so so so so much!
It is crazy how helpful this channel has been for me over the past couple months. From learning about a career in investment banking a few months ago to helping me prepare for a finance quiz I have tomorrow… The high quality of your videos isn’t going unnoticed and I don’t doubt this channel will really blow up soon!
Your explanation is incredibly amateur-friendly and is definitely interesting that it made me watch the entire thing at 2.30am in the morning. Really appreciate your dedication and knowledge and I am excited to watch your other videos and those upcoming ones! 😁
Interviewer: What's the best method for calculating Terminal Value? Ben: Perpetuity Growth Method is without a doubt the absolute best method Interviewer: Why? Ben: It's the only method I've used.
Thanks so much! Super helpful in preparing for a corp fin interview - concise and to the point. Also thanks for including text boxes - makes it much easier to write down notes 😊
Started watching back your live stream of how to build one of these models. Extremely helpful. Have been looking for a while around this topic, however have found your walk through on the live stream and explanation in this video to be one of the best ive found. Appreciate it.
Really good video! Very informative and easy to understand. But i realised that i really have to up my finance english skills. Some definitions you gave were a little fast for me. But thats not your fault!
Very valuable content! I'm trying to go into IB but it's hard if you're 29 yo with no prior exp in that field. My goal is to get an internship (doesn't have to be in a BB oder top tier bank) and I'm trying to increase my chances by completing an IB course on udemy. Keep going with your content! I like them, new sub here👍
i did post about comparable comps already but probably won’t do one on lbo or precedent transactions because they’re not really relevant for most retail investors
I would of lover to seen you use the exit multiple. And fcf gives us market value too, I've seen ppl use a terminal multiple times the fcf to get market cap.
Brother, you are doing such a great thing. Thank you so much. i would like to request you to bring some more videos on financial analysis. if you are free then please try to make details explanation with some examples in excel.
Hi I'm recently getting my 1st year Finance classes started in GWU, I'm really nervous and stressful but after learning from your video at least I can have a little bit more confidence on prep for what I will learn in the upcoming classes! Thank you for YOUR useful content!
I made it nearly all the way to the end until you put it all together - fractions, formulae and accounts gave me PTSD from doing algebra, maths and accounting in school, and my brain went into lockdown and noped right outta there; I think I'm doomed to fail! I went and re-watched the suggested video about valuing a company, and if I took everything in, I think I have a noob question: in every example (around the 7:00 min mark here/the whole other video in its entirety), the companies used are solid, for lack of a better word. Can you use any of these methods to value high-growth stocks where they're not making money, taking out loans, etc to get a good idea of how to value them? It doesn't seem like it's appropriate with DCF, but I'm still a little unsure about the other scenario. Or is this an entirely different video altogether? I hope my question makes sense....
yes as i mentioned really high growth companies or cash flow negative companies can be analyzed with a DCF as long as there is confidence that those companies will eventually generate positive cash flow. back at jpm i did 20-30 year DCFs for biotech companies that didn't even have any products on the market and in those scenarios you use a probability weighted valuation to value the company (which is another topic)
@@rareliquid - Awesome, thanks for the clarification! If it's worth your time, I wouldn't mind seeing you do a sample like you did at JPM (or just put it on the list!). Cool video overall. I'm an absolute idiot when it comes to numbers, formulae, etc, so it's gonna take a whole load more time with me to come to grips with DCFs, but I want to learn 😅
i guess the crypto startup use similar valuation model now. it's a great explanation to a outsider like me who is currently trying to propose a valuation for fundraising event. thanks a lot
*As I mentioned in the video, here are some further explanations of some of the concepts I brought up:*
*Capital Expenditures (CapEx)* - Cash you spend on Plant, Property, and Equipment (PP&E). So Apple spends $100 million on a new office building, that's $100 million of Capital Expenditures. CapEx is NOT found in your income statement because they are usually really large one-time expenses and the income statement tries to capture expenses that occur regularly. Instead, the costs of CapEx are depreciated over time (see below).
*Depreciation & Amortization (D&A)* - In the CapEx example, if Apple bought a new building for $100 million and that building had a "useful life" of 20 years, the annual D&A would be $100 million / 20 = $5 million a year. D&A IS found in your income statement either embedded into COGS or Operating Expenses. D&A allows you to fairly deduct CapEx spend over a period of time but it's not actual cash that you're spending (instead the actual cash was a one-time payment in CapEx).
*Net Working Capital (NWC)* - For a DCF, this is your current OPERATING assets (i.e. excludes cash, includes assets like inventory, accounts receivable, etc.) minus your current OPERATING liabilities (i.e. excludes debt, includes accounts payable, deferred revenue, etc.). Standard definition for NWC is just current assets minus current liabilities but there's a difference for the DCF. NWC looks at the regular cash inflows and outflows from a company's day to day operations.
*WACC Formula* - As a reminder, this is your (% of equity * cost of equity) + (your % of debt * cost of debt * (1 - Tax rate)). % of equity means [equity value / (equity value + debt)]. cost of equity is found through the CAPM formula (risk free rate + beta * market risk premium). % of debt is [debt / (debt + equity value)]. You multiply the debt part times 1 - tax rate because interest payments are tax deductible.
💰Get Free Money💰
► Coinbase - Get $10 in Free Bitcoin: coinbase.com/join/chon_df?src=ios-link
► Moomoo - Get 2 Free Stocks: j.moomoo.com/005RTE
► Webull - Get 2 Free Stocks: act.webull.com/invite/share.html?inviteCode=5gwmzRWoEVWd
► Schwab - Earn up to $500: www.schwab.com/public/schwab/nn/refer-prospect.html?refrid=REFERBYVYKMZ6
► Blockfi - Get up to $250: blockfi.mxuy67.net/Keje6z
► Audible - 30 Day Free Trial (Unlimited Audio Books!): amzn.to/3u8aBLq
Hey Ben, thanks for all the explainations. I was wondering whether JPM really uses CAPM model and not a more advanced one as other tier 1 banks. It seems too simple to me :D Keep up the good work!
i am missing an explanation of the following term: cost of debt
would highly appreciate it.
@@qwertz9501 cost of debt (i think) would be the interest rate that theyre paying on debt, its like how much its costinf them to borrow money.
I took a 9hr course on DCF and you cleared my problems in 18mins. Thank you so much
good to hear! haha
Hi Ben, I am a year-one LSE student. So many of our students are trying to get into investment banking and it's really nice of you to provide free contents. Thank you so so so so so so much!
It is crazy how helpful this channel has been for me over the past couple months. From learning about a career in investment banking a few months ago to helping me prepare for a finance quiz I have tomorrow… The high quality of your videos isn’t going unnoticed and I don’t doubt this channel will really blow up soon!
Your explanation is incredibly amateur-friendly and is definitely interesting that it made me watch the entire thing at 2.30am in the morning. Really appreciate your dedication and knowledge and I am excited to watch your other videos and those upcoming ones! 😁
Content keeps getting better and better🙌🏼
thanks!
Nicely done, Ben. Always a pleasure watching and learning from your videos. Cheers!
Favorite kind of videos!! keep it up man!
thanks! will do
Really helpful. I’m 17 trying to get into this and your channel is so helpful
Interviewer: Walk me through a DCF
Me: hold my rareliquid subscription
LOL
Interviewer: What's the best method for calculating Terminal Value?
Ben: Perpetuity Growth Method is without a doubt the absolute best method
Interviewer: Why?
Ben: It's the only method I've used.
Your content is great man!!
You are the best bro
I’ve been waiting for this. Thank you for doing ittttt
no prob!
Thanks Ben for sharing precious information as always!
no prob~
Very helpful! I really like that you added explanation and how you use the DCF model at work .
great informative videos and appreciate the added video effects you do to make it more appealing
Thanks so much! Super helpful in preparing for a corp fin interview - concise and to the point. Also thanks for including text boxes - makes it much easier to write down notes 😊
DUDE I needed this like last week!! The struggles I had at work trying to figure this out 😂😂
Started watching back your live stream of how to build one of these models. Extremely helpful. Have been looking for a while around this topic, however have found your walk through on the live stream and explanation in this video to be one of the best ive found. Appreciate it.
Thanks for sharing. Very articulated piece
Eyyyyyy glad to see my fellow bear. Go Bears! , instant sub.
Such an great explanation. Thank you!
This was extremely helpful! I’d love more basic corporate finance videos and examples. Looking forward to your next vid🙂
thanks daniel!
Thank you so much for your video, Ben. I like it a lot, especially the way you explain and communicate. Love it and will be your loyal follower
no problem and thank you for the support!
really appreciate this content. looking forward to future contents like this
Thank you for the really clear explanation! Would like to see more in-depth dive into case studies using excel :))
Noted!
Thank you for clarifying the concepts of DCF and WACC. it is very helpful to a non-business student earning an MBA.
This is higher quality that the materials I was given at Uni.
Love this type of videos
good to hear!
Thank you for this great video, I love the formatting
Glad you enjoyed it!
Appreciate the work and effort in explaning the concepts!
This is amazing bro as a trader this gives you an edge when it comes to trading and valuations thanks a lot brother
Thank you, This video is very helpful, I'll learn many thing from your channel
Love your videos so much!
Thank you so much!
You are super helpful! Thank you so much for this!
Leaving some love in the comments!
thank you!
Love the videos. Keep em coming!
Thanks Andrew!
Love your teaching!!! so simple and clear :)
great explanation, rareliquid!
thank you anna!
Thanks for sharing Ben. I'll be greatful if you do a series about finance for beginners😍
Thank you for this! Super helpful and useful- loving the IB insights.
Glad it was helpful!
Love ur videos better than my professors~
This is helpful...assisted me in my home work
Very clear explanation, extremely helpful ！ thanks a lot ~~~~
Nice and simple breakdown. Great job. This would be useful for people who are learning
Fire video, thank you.
Here before rareliquid reaches 1M 🤩
Really great video! I personally look at forecasting and DCF as two different parts of an analysis
It was pretty much helpful 👍🏻👍🏻
You saved me for my finance final
Hey Sydney! Glad I could help
Good video, very helpful for my group work haha, thanks
Great video, keep it up!!
Thanks!
Great video, thank you for sharing it. Congrats!
Very helpful! Thank you!
np sara!
absolutely clear! Could u plz make M&A transactions on the next one?
Thank you!!
5:21
8:08 cf. Stable top line rev
Enterprise value means the same thing as intrinsic value?
'Relatively predictable'
You rock, dude. 😊
great video very informative
Thanks for this! You're a good teacher! 👍🏾
Love from India 🇮🇳
How would you go about projecting NWC, EBIT, and Capital Expenditures?
Great Video! Even that i am advanced in this field, i kind of enjoyed the explanation. More of that !!👍
Thanks, your video help me a lot thanks
Good Job!
Thanks!
How did you calculate the change in revenue % under change in NWC?
Nvm, I figured it out. Thanks for the vid!
Really good video! Very informative and easy to understand.
But i realised that i really have to up my finance english skills. Some definitions you gave were a little fast for me. But thats not your fault!
thanks more then a lot (= keep up the grind: its unique
Amazing!
Thanks It very helpful
Commenting for the algorithm
thanks!
Waiting for the advanced DCF Model :)) Thanks a lot
coming soon~
Man, that General Electric comment did not age well at all. But I appreciate what you were trying to say. :)
Very valuable content! I'm trying to go into IB but it's hard if you're 29 yo with no prior exp in that field. My goal is to get an internship (doesn't have to be in a BB oder top tier bank) and I'm trying to increase my chances by completing an IB course on udemy. Keep going with your content! I like them, new sub here👍
nice content !
Can you teach us other valuation methods like ratios and other stuff.
Where Can i download the Excel dcf?
Great video! Would really appreciate if you could also make some videos on LBO analysis and other valuation methods.
i did post about comparable comps already but probably won’t do one on lbo or precedent transactions because they’re not really relevant for most retail investors
You should do a series of videos making in-depth models for trending stocks. Oh and thanks I really enjoyed your video.
I would of lover to seen you use the exit multiple. And fcf gives us market value too, I've seen ppl use a terminal multiple times the fcf to get market cap.
Request to also put up This kinda series on LBO you did for 6.1 Bn deal
Brother, you are doing such a great thing. Thank you so much. i would like to request you to bring some more videos on financial analysis. if you are free then please try to make details explanation with some examples in excel.
Great content and love the animations in your presentation. "Off-White vibes"
How do you determine how many years to project out and discount back? The difference between choosing like 5 and 10 can be massive
usually if it’s a company with a lot of growth potential then 10 years if it’s more stable then 5 years
do you have any eli5 videos? so many concepts and steps are confusing, fast and non intuitive. a detailed breakdown of this would be really helpful!
Hi I'm recently getting my 1st year Finance classes started in GWU, I'm really nervous and stressful but after learning from your video at least I can have a little bit more confidence on prep for what I will learn in the upcoming classes!
Thank you for YOUR useful content!
Thank you
I made it nearly all the way to the end until you put it all together - fractions, formulae and accounts gave me PTSD from doing algebra, maths and accounting in school, and my brain went into lockdown and noped right outta there; I think I'm doomed to fail!
I went and re-watched the suggested video about valuing a company, and if I took everything in, I think I have a noob question: in every example (around the 7:00 min mark here/the whole other video in its entirety), the companies used are solid, for lack of a better word. Can you use any of these methods to value high-growth stocks where they're not making money, taking out loans, etc to get a good idea of how to value them? It doesn't seem like it's appropriate with DCF, but I'm still a little unsure about the other scenario. Or is this an entirely different video altogether? I hope my question makes sense....
yes as i mentioned really high growth companies or cash flow negative companies can be analyzed with a DCF as long as there is confidence that those companies will eventually generate positive cash flow. back at jpm i did 20-30 year DCFs for biotech companies that didn't even have any products on the market and in those scenarios you use a probability weighted valuation to value the company (which is another topic)
@@rareliquid - Awesome, thanks for the clarification! If it's worth your time, I wouldn't mind seeing you do a sample like you did at JPM (or just put it on the list!).
Cool video overall. I'm an absolute idiot when it comes to numbers, formulae, etc, so it's gonna take a whole load more time with me to come to grips with DCFs, but I want to learn 😅
very useful video. My question is based on what you make your assumptions ?
Amazing😍
Thank you for the video. It was simple and clear.
Also, will you be posting a excel sheet with a templete for DCF?
i guess the crypto startup use similar valuation model now. it's a great explanation to a outsider like me who is currently trying to propose a valuation for fundraising event. thanks a lot
Great video. Where did you get the growth rates from?
Great explanation. Subscribing ✅
Awesome, thank you!
10:55 I'd add minimum GDP Growth Rate + Inflation Rate
Just found you. Please give more content so we can continue to learn to invest lol
What’s the best way for one to take a deep dive into this and become competent
Could you please mention how did you move your borders in slides? I have searched everywhere but not able to find it. Please.
Great video! Do you have a DCF spreadsheet calculator that you recommend for beginners?
Damn bro wanna be my tutor 😂🤣 studying this in uni rn 👏😎