The Motley Fool Discussion Boards

Previous Page

Learning to Invest / Valuation Strategies


Subject:  Discounted Cash Flow Model - Negative FCF Date:  1/31/2011  12:51 PM
Author:  atta9508 Number:  1625 of 1675

Good Day - I am currently developing a DCF Model to determine FV, PV, terminal value, and enterprise value. It works well for companies with positive historic growth (assuming the inputs are correct). I have been looking at a company with negative cash flow and having a hard time modeling negative cash flow. It is a young company which is why I am looking at it.

If people could provide some insight on methods to determine future value each year, terminal, and enterprise value.

For now what I have done for future cash flow calcs is assumed a crazy growth rate and the following equation

If previous year cash flow is negative
Future Value = Previous Year FCF - Previous Year FCF * Growth Rate

in the above calculation, the previous year FCF is negative.

IF previous year cash flow is positive
Future Value = Previous Year FCF (1+Growth Rate)


Copyright 1996-2018 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us