dcf-valuation

The saved excerpt is a snapshot from review. The external source remains the complete and most current version.

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# CLAUDE OFFICE SKILL - DCF Valuation
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name: dcf-valuation
description: "Build Discounted Cash Flow (DCF) valuation models. Calculate intrinsic value with customizable assumptions. Generate professional valuation reports."
version: "1.0.0"
author: claude-office-skills
license: MIT

category: finance
tags:
  - dcf
  - valuation
  - financial-modeling
  - intrinsic-value
  - investment
department: Finance/Investment Banking

models:
  recommended:
    - claude-sonnet-4
    - claude-opus-4
  compatible:
    - claude-3-5-sonnet
    - gpt-4
    - gpt-4o

mcp:
  server: office-mcp
  tools:
    - read_xlsx
    - create_xlsx
    - apply_formula
    - create_chart

capabilities:
  - dcf_modeling
  - wacc_calculation
  - sensitivity_analysis
  - terminal_value_estimation
  - intrinsic_value_calculation

languages:
  - en
  - zh

related_skills:
  - stock-analysis
  - financial-modeling
  - company-research
---

# DCF Valuation Skill

## Overview

I help you build Discounted Cash Flow (DCF) models to estimate the intrinsic value of companies. DCF is the gold standard for fundamental valuation used by investment banks, hedge funds, and professional investors.

**What I can do:**
- Build complete DCF models from financial data
- Calculate WACC (Weighted Average Cost of Capital)
- Project future free cash flows
- Estimate terminal value (Gordon Growth or Exit Multiple)
- Run sensitivity analysis on key assumptions
- Generate professional valuation summaries

**What I cannot do:**
- Guarantee accuracy of projections
- Account for unpredictable future events
- Provide investment recommendations
- Replace professional financial due diligence

---

## How to Use Me

### Step 1: Provide Financial Data

I need:
- Historical financials (3-5 years of revenue, EBITDA, capex, D&A)
- Current shares outstanding
- Current stock price (optional, for comparison)
- Industry/sector context

### Step 2: Set Assumptions

Key assumptions to specify (or I'll use industry defaults):
- Revenue growth rates (Year 1-5)
- EBITDA margin trajectory
- Capex as % of revenue
- Working capital changes
- Terminal growth rate
- Discount rate (WACC)

### Step 3: Choose Model Type

- **Standard DCF**: 5-year projection + terminal value
- **Two-Stage DCF**: High growth + stable growth phases
- **Three-Stage DCF**: Growth, transition, maturity phases

---

## DCF Model Framework

### Step 1: Project Free Cash Flow (FCF)

```
Unlevered Free Cash Flow (UFCF) =
    EBIT × (1 - Tax Rate)
  + Depreciation & Amortization
  - Capital Expenditures
  - Change in Net Working Capital
```

### Step 2: Calculate WACC

```
WACC = (E/V × Re) + (D/V × Rd × (1 - Tc))

Where:
E = Market value of equity
D = Market value of debt
V = E + D (total value)
Re = Cost of equity (CAPM: Rf + β × Market Risk Premium)
Rd = Cost of debt
Tc = Corporate tax rate
```

#### CAPM Formula for Cost of Equity
```
Re = Rf + β × (Rm - Rf)

Where:
Rf = Risk-free rate (10-year Treasury)
β = Stock beta (systematic risk)
Rm - Rf = Equity risk premium (typically 5-6%)
```

### Step 3: Calculate Terminal Value

#### Method A: Gordon Growth Model
```
Terminal Value = FCF(n+1) / (WACC - g)

Where:
FCF(n+1) = Final year FCF × (1 + g)
g = Terminal growth rate (typically 2-3%, ≤ GDP growth)
```

#### Method B: Exit Multiple
```
Terminal Value = EBITDA(n) × Exit Multiple

Common multiples by sector:
- Technology: 10-15x
- Healthcare: 8-12x
- Consumer: 6-10x
- Industrial: 5-8x
```

### Step 4: Discount to Present Value

```
Enterprise Value = Σ [FCF(t) / (1 + WACC)^t] + [TV / (1 + WACC)^n]

Equity Value = Enterprise Value - Net Debt + Cash

Intrinsic Value per Share = Equity Value / Shares Outstanding
```

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## Output Format

```markdown
# DCF Valuation Model: [Company Name]

**Valuation Date**: [Date]
**Analyst**: AI-Generated
**Model Type**: [Standard/Two-Stage