Discounted Cash Flow Building - Apple

Overview In this exercise, you will build a comprehensive Discounted Cash Flow (DCF) model for Apple Inc., incorporating both operating forecasts and share dilution mechanics. You will project Apple’s financial performance, estimate unlevered free cash flows, and value the company using two terminal value approaches. A key focus of this exercise is translating enterprise value into a realistic equity value and fair share price by correctly estimating fully diluted shares outstanding. Learning Goals Develop an end-to-end understanding of how a company’s operating performance translates into long-term financial projections. Learn how to convert accounting earnings into Unlevered Free Cash Flow (UFCF) by incorporating non-cash items, reinvestment needs, and working capital dynamics. Understand how capital structure, net debt, and share-based compensation affect the bridge from Enterprise Value to equity value and fair value per share. Apply WACC to discount future cash flows and evaluate the time value of money in valuation. Value a business using two commonly applied terminal value frameworks: the Perpetual Growth method and the Exit Multiple (EBITDA) method. Build intuition for how assumptions around growth, margins, reinvestment, and terminal value drive intrinsic valuation outcomes. Key Concepts Revenue Growth and Operating Margins: Core drivers of Apple’s operating performance. EBITDA, EBIT, and NOPAT: Key profitability metrics used to derive free cash flow. Unlevered Free Cash Flow: Cash flows available to all capital providers, independent of capital structure. Working Capital: Modeling net working capital as a percentage of revenue to capture cash tied up in operations. WACC: Incorporating market risk premium, beta, cost of debt, and tax rate to determine the discount rate. Terminal Value (Perpetuity Growth) and Terminal Value (Exit Multiple): Two common approaches to valuing cash flows beyond the explicit forecast period. Enterprise Value vs. Equity Value: Understanding how operating value converts into shareholder value. Fully Diluted Shares Outstanding: Adjusting for options, RSUs, and convertible securities to compute a realistic per-share valuation.

Practice Discounted Cash Flow Building - Apple with interactive Excel modeling exercises in our DCF Modeling module.

This hands-on modeling exercise helps you master Discounted Cash Flow Building - Apple through real-world Excel practice and financial modeling techniques.