A4 – Financial Modeling Assignment: 3-Statement Model & DCF Analysis
Objective: The purpose of this assignment is to develop a fully integrated three-statement financial model (Income Statement, Balance Sheet, and Cash Flow Statement) that is linked to a Discounted Cash Flow (DCF) valuation. Please use the provided Excel templates to build your models for the company that you used in A2. Additionally, you will submit a written memo discussing the assumptions behind their growth rate projections.
The STOCK FOR THIS ASSIGNMENT IS DHR. Danaher Corporation
Assignment Details:
Type: Individual assignment (collaboration encouraged).
Grading: Total = 100 points.
Deliverables
Excel File: A fully integrated 3-statement financial model linked to a DCF valuation (DCF+WACC).
Memo (1 page, docx format): A concise discussion of the assumptions behind the company’s projected growth rates.
Instructions:
Part 1: Financial Model (Excel)
Use the provided template to construct a three-statement model.
Ensure that the model is fully linked, meaning that changes to key assumptions flow through all financial statements.
Your model should include:
Historical financial data.
Forecasted financials based on reasonable assumptions.
A DCF valuation that includes:
Revenue and expense growth assumptions.
Free Cash Flow to the Firm (FCFF) projections.
Weighted Average Cost of Capital (WACC) calculation.
Terminal value estimation (Gordon Growth or Exit Multiple).
Implied enterprise and equity value.
Part 2: Memo on Growth Rate Assumptions
Your memo should be one page and provide a structured discussion of the growth rate assumptions used in your model. It should include:
Introduction: Briefly state the purpose of the memo and the company you are analyzing.
Revenue Growth Assumptions:
Explain the rationale behind your revenue growth projections.
Reference historical trends, industry benchmarks, or macroeconomic factors.
Expense Growth Assumptions:
Justify assumptions for cost of goods sold (COGS), operating expenses, and capital expenditures.
Terminal Growth Rate:
Provide reasoning for the chosen long-term growth rate.
Compare it to industry growth rates and GDP growth trends.
Conclusion: Summarize key takeaways and any risks/uncertainties in your assumptions.
Grading Criteria
Financial Model (70 points)
Accuracy of financial statement linkages (20 points)
Logical and well-supported projections (15 points)
Proper DCF setup, including WACC and terminal value (20 points)
Formatting, clarity, and usability of the model (15 points)
Memo (30 points)
Clarity and organization (10 points)
Justification of growth rate assumptions (15 points)
Consideration of industry trends and macroeconomic factors (5 points)
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