From the course: Investment Evaluation

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Solution 2: Calculate DCF over 30 years

Solution 2: Calculate DCF over 30 years - Microsoft Excel Tutorial

From the course: Investment Evaluation

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Solution 2: Calculate DCF over 30 years

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- [Instructor] Let's start the second challenge. So, if you want the completed solution spreadsheet, you can find it in the exercise files. It's called oh two, oh four, solution two. Now, you're asked for a 50% stake in a company that generates free cash flows about $100,000. That means your free cash flow for that first year is gonna be 50,000. So, I'm gonna go ahead type that into cell B12. I would like to evaluate all the cash flows for the years first, so I'm gonna use the growth rate to do that, which for the first five years is four percent. So, in cell B13, I can type in equals, and to calculate the cash flow for the second year, I'm simply gonna multiply that 50,000 by 1.04, and I'm gonna keep doing that for the first five years. Year over year, and this is actually what we mean by compounding interest. Okay, great. So, we've got that down, and the first five years, four percent. Now, the last 25 years is 10%, so it looks like the company is gonna be doing really well for…

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