How do the pieces come together into one intrinsic value?

You now hold every part: a forecast of free cash flow, a discount rate, and a terminal value. This lesson bolts them together into a single per-share intrinsic value — the payoff the whole course has been building toward.

The full assembly, step by step

1. Discount the forecast years. Take each of your five forecast free-cash-flow numbers and bring it back to today using your WACC. Near years shrink a little; later years shrink more.
2. Discount the terminal value. The terminal value sits at the end of year five, so discount it back to today the same way — five years of shrinkage.
3. Add them up. The sum of the discounted forecast years plus the discounted terminal value is the enterprise value — the worth of the whole business (using FCFF).
4. Bridge to equity. Subtract net debt (debt minus cash) to get the equity value — the part that belongs to shareholders.
5. Per share. Divide equity value by shares outstanding for an intrinsic value per share you can hold next to the market price.

A rounded walk-through

Discount the five forecast years at 8% and something neat falls out. You grew that cash at exactly the same 8% you are now discounting at, so growth and discounting cancel: every year comes back to precisely the €350 you started from. €378 ÷ 1.08 = €350; the year-2 figure divided by 1.08 twice is €350 again; and so on down the line. Five years, five times €350 — the discounted forecast period is exactly €1,750. (That tidiness is a coincidence of the two rates matching. Assume 6% growth against an 8% WACC and each year would come back a little smaller than €350.)

Now add the terminal value of ~€9,580 (from last lesson), discounted five years back at 8%, worth about €6,520 today.

• Enterprise value ≈ €1,750 + €6,520 = €8,270
• Subtract net debt of, say, €1,270 → equity value ≈ €7,000
• Divide by 1,000 shares → €7.00 per share of intrinsic value

Set that €7.00 beside the market price. If the price is €5, your assumptions imply more value than the market pays. If it's €10, the reverse. Either way it's an observation about assumptions, not a signal to act — the terminal value alone was ~79% of the enterprise value, so this "€7.00" leans hard on the shakiest input.

The number is a beginning, not a verdict

A finished DCF feels like an answer. It's really the start of the interesting work: which assumptions is this €7.00 most sensitive to, and how confident are you in each? That question is the entire final unit.

In the data

The last two steps both have a catch. Net debt, here the fourth row, is already debt minus cash, but fixed at a fiscal year end, while the price you compare against is live:

The share count is worse. The balance sheet's share count (the last row above), the count on the company's profile, and the share-count history each give a different number for the same company, because each is taken on a different date. Which one you divide by moves a per-share value by a percent or two before a single assumption has been argued.

Divide by the diluted count, not the basic one. Options, restricted stock and convertibles that are in the money will become shares, and a value per basic share overstates what each holder is entitled to. Data services rarely print a diluted count, but trailing net income divided by trailing diluted EPS backs it out. This is also where stock-based compensation is settled. Either subtract it from every forecast year of free cash flow, or divide by the diluted count and hold it constant. Doing neither is the common error, and it flatters the value twice.

Try it now

1. Using your forecast, WACC, and terminal value, assemble a rough enterprise value on paper — discounted forecast years plus discounted terminal value.
2. Bridge to equity with the net debt in the table above.
3. Divide by shares, and discover there is more than one share count. The balance sheet count is in the table above; this is the profile's:

Compute your per-share value twice, once with each, and express the difference as a percentage of the smaller one. Then a third count, from the share-count history:

Do it again with that one. Three answers, one company, one afternoon, and not a single assumption argued yet. 4. Compare with the market's own per-share price. Divide the market capitalisation below by the shares outstanding from step 3:

Then write the honest sentence: "My assumptions imply X per share against a market price of Y — the gap reflects a difference in assumptions, and I could be the one who is wrong." Remember what the terminal value was as a share of your enterprise value; the sentence leans on your shakiest input.