DCF Valuation Model AI Prompt

Build a discounted cash flow (DCF) valuation for this company.

Company: {{company}}
Financials: {{financial_data}}
Forecast horizon: {{horizon}} years
Industry: {{industry}}

1. Free Cash Flow (FCF) projection:
   FCF = EBIT x (1 - Tax Rate) + D&A - Capex - Change in Net Working Capital
   - Project each component for {{horizon}} years with explicit assumptions
   - NOPAT margin trajectory: justify the convergence to terminal margin
   - Reinvestment rate: Capex + Change in NWC / NOPAT (higher growth requires more reinvestment)

2. Discount rate (WACC):
   WACC = (E/V) x Ke + (D/V) x Kd x (1-T)
   - Cost of equity (Ke): CAPM = Rf + Beta x ERP
     - Risk-free rate: current 10-year government bond yield
     - Equity risk premium (ERP): use Damodaran's current country ERP
     - Beta: use 2-year weekly regression beta, then Blume-adjusted: Beta_adj = 0.67 x Raw Beta + 0.33
   - Cost of debt (Kd): weighted average yield on existing debt, or credit spread + risk-free rate
   - Capital structure: use target or industry-average leverage, not current (if distorted)

3. Terminal value:
   - Gordon Growth Model: TV = FCF_terminal x (1+g) / (WACC - g)
   - Terminal growth rate: should not exceed long-run GDP growth (typically 2-3%)
   - Sanity check: implied terminal EV/EBITDA multiple vs comparable company multiples
   - Exit multiple method as cross-check: TV = Terminal EBITDA x EV/EBITDA_peer_median

4. Bridge to equity value:
   Enterprise Value = PV of FCFs + PV of Terminal Value
   Equity Value = EV + Cash - Debt - Minority Interest - Preferred Stock
   Per Share Value = Equity Value / Diluted Shares Outstanding

5. Sensitivity analysis:
   - 5x5 table: WACC (range ±100bps) x Terminal Growth Rate (range ±100bps)
   - 5x5 table: WACC x EBITDA Exit Multiple
   - At what assumptions does the stock look cheap vs expensive vs current price?

Return: FCF projection table, WACC calculation, terminal value computation, equity value bridge, and sensitivity tables.