This Excel-based valuation model combines a conventional Discounted Cash Flow (DCF) analysis with a 1,000-trial Monte Carlo simulation to measure valuation uncertainty and investment risk.
Users can define discrete probability distributions for six important valuation assumptions:
Tax rate
Discount rate
Perpetual growth rate
Current share price
Debt
Capital expenditure
The integrated DCF model calculates unlevered free cash flow from EBIT, cash taxes, depreciation and amortisation, capital expenditure, and changes in net working capital. Terminal value is estimated using both the perpetual-growth and EV/EBITDA exit-multiple methods, with the model using their average in the valuation.
The workbook calculates enterprise value, equity value, intrinsic value per share, target-price upside, and internal rate of return. It also compares intrinsic value with the simulated market value.
Each Monte Carlo trial randomly selects assumptions according to the probabilities entered by the user. The model then recalculates enterprise value, equity value, value per share, upside or downside, and the proportion of enterprise value represented by terminal value.
A concise simulation summary reports:
Mean and median value per share
10th- and 90th-percentile valuations
Mean potential upside or downside
Probability that intrinsic value exceeds the simulated market price
Total number of simulations
Pressing F9 generates a fresh 1,000-trial simulation, allowing users to examine a new range of possible valuation outcomes instantly.
The workbook is fully formula-driven and requires no VBA, external software, or specialist add-ins. It is suitable for financial analysts, investors, consultants, students, and business owners seeking a transparent introduction to probabilistic DCF valuation.
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Source: Best Practices in Financial Modeling, Valuation Excel: Simple Monte Carlo DCF Valuation Excel (XLSX) Spreadsheet, Deon de Wet-Roos
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