How to use this hub
Valuation is an inputs-and-assumptions exercise. Use WACC (or another required return) as a discount rate proxy, compute a base-case DCF, then stress-test key assumptions with sensitivity analysis. Finally translate enterprise value to equity value using net debt.
A simple valuation workflow
| Step | Tool | Purpose |
|---|---|---|
| 1 | WACC | Estimate a discount rate proxy |
| 2 | DCF valuation | Compute base-case enterprise value |
| 3 | DCF sensitivity | See how value changes under assumption shifts |
| 4 | Multiple valuation | Cross-check with market comps |
| 5 | Equity value | Convert EV to equity value (EV - net debt) |
What usually drives the result
- Discount rate changes can swing value materially (especially with long-duration cash flows).
- Terminal value assumptions often dominate the model (sanity-check terminal growth).
- Cash flow quality matters more than accounting profit (working capital and capex matter).
- Multiples are market moods; use them as a cross-check, not a truth source.
Common mistakes
- Setting terminal growth at or above the discount rate (terminal value blows up).
- Using WACC for projects with different risk than the overall business.
- Treating a point estimate as precise (use ranges and sensitivity).