◆ Models I · drill · Financial Modeling Keyboard Mastery track

Build the discount rate

a discount rate is built, not quoted — five comps, one median, and the last line just weights the two sides.

The DCF goes up to the MD tomorrow morning and the discount rate is still an empty cell. Five comps sit on the page with their broker betas, each one levered at its own balance sheet — strip that leverage out of all five, take the median, and relever it at this target’s own debt and equity. Then price the equity side with CAPM — the risk-free rate plus beta times the equity risk premium — tax-effect the debt side, and weight the two off one denominator.

train this drill → par 112s · optimal 107 keys · keyboard only · free

The shortcuts in this drill

Shift+↓⇧↓ on macExtend selection one cell

Ctrl+D⌘D on macFill down from the cell above

Build the logic once in the top cell, select down, and stamp it — the standard way to fill a schedule.

Ctrl+S⌘S on macSave

functions you'll type: MEDIAN()

The optimal line

the par-setting sequence, straight through:

E5 unlevered β =C5/(1+(1-$H$7)*D5) · fill E5:E9 ↓ · E10 =MEDIAN(E5:E9) · E13 relevered β =E10*(1+(1-H7)*H10/H9) · E14 Ke =H5+E13*H6 · E15 =H8*(1-H7) · E16 =(H9*E14+H10*E15)/(H9+H10) · ctrl+s

More Models I drills

Build the unlevered FCF

EBIT → less taxes → NOPAT → plus D&A, less capex and the NWC build: the row every DCF disc

Discount the cash flows

Discount factors × free cash flows build the present-value row; a Gordon terminal value an

Run the comps

Build both enterprise-value multiples across the peer set, read the median, high and low,

Run precedent transactions

A six-deal precedent tape, the median multiple paid, and the implied equity value

uFCF → all 74 drills

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