Discounted cash flow model project report

The purpose of this thesis is to compare the practical use of the DCF model with the theoretical recommendations. The empirical study is based on eight different DCF models performed by American, European and Nordic investment banks on the Swedish retail company Hennes & Mauritz (H&M). These models are currently being used internally by the corresponding equity research departments to determine the fair value of the H&M stock. The aspects that are studied are regarded as the basic theoretical requirements of the DCF model…

Contents

1. Introduction
1.1 Purpose and contribution
1.2 Delimitations
1.3 Outline
2. Data and methodology
2.1 Data
2.2 Methodology
3. Theoretical framework
3.1 Analysis of historical performance
3.2 Forecasting future performance
3.3 Estimating the cost of capital
3.4 Estimating the continuing value
3.5 Other aspects
3.5.1 Financial cash flow
3.5.2 Inflation
3.5.3 Excess marketable securities
3.5.4 Currency forecasts
4. Empirical findings
4.1 Historical information
4.2 Forecasting procedure
4.3 Discount rate
4.4 Steady state assumption
4.5 Other valuation aspects
4.6 Implied target prices and stock performance
5. Discussion of empirical results
5.1 Historical information
5.2 Forecasting procedure
5.3 Discount rate
5.4 Steady state assumption
5.5 Other valuation aspects
5.6 Summary
6. Why the discrepancies?
7. Conclusion
7.1 Self-criticism
7.2 Implications for future research
8. References

Author: Martin Edsinger,Christian Stenberg

Source: Stockholm School of Economics