skills/dcf-model-builder/references/model-math.md

# DCF Model Math

Keep formulas in the engine. Use this reference only to check public math intent.

FCFF: revenue drives EBIT, tax affects NOPAT, then add D&A and subtract capex and change in NWC to reach unlevered FCF.

FCFE: start from net income or levered FCF logic, adjust reinvestment and net borrowing, and discount at cost of equity.

WACC equals weighted after-tax debt cost plus equity cost, with optional preferred stock. Perpetual-growth terminal value requires WACC greater than growth. Exit-multiple terminal value should be cross-checked against implied growth and market evidence.

Present value uses explicit forecast FCF plus PV of terminal value. Mid-year convention affects discount timing; keep it visible in assumptions.

Enterprise-to-equity bridge adds cash and non-operating assets, subtracts debt-like claims, then divides by diluted shares. Flag stale share count, lease, pension, minority-interest, and option data.