This workout asks us to workout the implied share value of the following company Well what this really means is that we have to calculate an enterprise value and go over the enterprise value to equity bridge This is now to see all of the steps to a DCF Firstly we would calculate the free cash flows and there they are Next we find our WACC or discount rate, 7% After that we calculate the terminal value and there it is of 800 So what we need to do now is discount those cash flows and terminal value That will then get us our enterprise value and once we've done that we can go over the EV equity bridge So let's start by calculating our discount factor Now the discount factor formula is one divided by one plus your WACC (or discount rate) All to the power of the number of years that the cash flow is from today So let's use that, I'm going to put one divided by one plus (and I'm going to go up and find my discount rate or WACC) I'm going to lock onto that and then I'm going to work out how many years my cash flow is from today and it's one year away from today Great! Now if I add a few more decimal places, I can see that the free cash flow of 100 (in a year's time) Will only 93.5% of that is the worth today So the present value is the 100 times by the discount factor 93.5 I can copy these two formulas to the right And thus I've now got the present value of those first 5 years of free cash flows And that gets me the sum of the present value of the free cash flows in years one to five, 482.9 But hang on, I can hear you saying "you've forgotten about the terminal value, that represents the cash flows from year 6 onwards" We do need to present value that as well This terminal value, we can see that it's been put into year 5. So that is the value of the cash flows from year 6 onwards at the year 5 period So we need to discount it from year 5 back to today So I'll take that 800 and I will then multiply it by my discount factor in year 5 So it's only worth 71.3%, there it is and it comes to 570.4 If I now sum the two of them up I get my enterprise value Once we've done that, we need to go over the EV equity bridge So I take my enterprise value, I add on cash and I subtract cash or alternatively you subtract net debt Once you've got your equity value, you can then divide that by the number of shares outstanding To get your implied share value, 8.0