Simple 10-Year Valuation Model

Step 1. Forecast free cash flow (FCF) for the next 10 years.

Step 2. Dicount these FCFs to reflect the present value:

  • Discounted FCF = FCF for that year / (1 + R)^N. R = discount rate and N = year being discounted.

Step 3. Calculate the perpetuity value and discount it to the present:

  • Perpetuity Value = FCF10 x (1+g) / (R – g)
  • Discounted Perpetuity Value = Perpetuity Value / (1 + R)^10

Step 4. Calculate total equity value by adding the discounted perpetuity value to the sum of the 10 discounted cash flows (calculated in step 2):

  • Total Equity Value = Discoutned Perpetuity Value + 10 Discounted Cash Flow

Step 5. Calculate per share value by dividing total equity value by shares outstanding:

  • Per Share Value = Total Equity Value / Shares Outstanding.